China to Slap 15% Tariffs on Imported Ethanol to Reply Trade War

China planned to levy tariffs on some U.S. imports, such as denatured ethanol, to offset loss on steel and aluminum products, the Ministry of Commerce claimed on March 23.

U.S. President Donald Trump signed a memorandum on March 22 authorizing punitive annual tariffs of $60 billion on Chinese exports under a Section 301 case on Chinese intellectual property policies and practices.

China announced its own set of proposed tariffs worth $3 billion on March 23 to cope with this so-called “trade war” provoked by Trump administration.

China’s commerce ministry said it was planning two steps of retaliatory action:

• A 15% tariff on 120 goods worth almost $1 billion, including fresh fruit, nuts, wine, denatured ethanol, panax quinquefolius, seamless tube, etc.

• A 25% tariff on eight goods worth nearly $2 billion, including pork, aluminum scrap, etc.

  
  

At the present, the U.S. denatured ethanol is offered at $610/mt CFR China, and China has a 30% import duty on denatured ethanol. If 15% is added, the tariff will reach 45%. And then the price of the denatured ethanol imported from the U.S. will be roughly RMB 6,690/mt, which is far higher than the current anhydrous ethanol price of RMB 6,050-6,150/mt in Shandong and northern Jiangsu.

In view of this, if China slaps 15% tariffs on the denatured ethanol, the arbitrage window from the U.S. to China will be closed basically.

China’s total import volume of the ethanol was 712.1kt in 2016, while that was only 20kt in 2017, down 97% year-on-year due to the increase of the tariff. In the first quarter of 2018, it is predicted that China’s ethanol import volume will probably reach 200-300kt.

According to the data published by China Customs, China imported 73,029.76mt ethanol in January, among which the U.S. ethanol reached up to 73,026.43mt. If China continues increasing the tariff of denatured ethanol, it will exert a huge influence on the ethanol import market in 2018.

On March 8 (Washington Time), the US President Trump announced that the imported steel and aluminum products have threatened the U.S. national security, and the US decides to levy tariff on all imported steel and aluminum products except those imported from Canada and Mexico, with a tariff rate of 25% and 10% respectively.

As the two largest economies in the world, cooperation is the only correct choice between China and the United states. Both sides should proceed from the overall interests of two countries, focus on cooperation, control differences and jointly promote the healthy and stable development of China-U.S. economic and trade relations. China urges the Unite States to resolve China’s concerns as soon as possible and bridge differences through dialogue and negotiation, so as to avoid harming the overall situation of Sino-U.S. cooperation.