China Imposes Sugar Import Tariffs As High As 95%

Tyler Durden's picture

While tense trade negotiations between the US and Mexico over the price and quota for U.S. imports of Mexican sugar continue (a happy ending appears unlikely, especially after a Mexican sugar company on Friday called on the government to take action against American fructose producers and protect the local industry from US deals), a new protectionist measure involving sugar half way around the globe was unveiled on Monday when China - the world's biggest importer of the sweet substance - said it will impose significant penalties on sugar imports following lobbying by domestic mills.

According to the ruling first described by Reuters, up to a third of China's annual sugar imports will be impacted by an extra tariff for the next three years on shipments that the government said had "seriously damaged" the domestic industry.

The details: China currently allows just over 1.9 million tonnes of imports at a tariff of 15% as part of its commitment to the World Trade Organization. All imports above this amount are slapped with a 50% levy. After Monday's ruling, the total sugar duty will nearly double, with Beijing imposing an additional 45% tax to these imports in the current fiscal year taking the total to 95%. This will fall to 90% next year and 85% a year later, China's Commerce Ministry said in a statement. The ruling exempted 190 smaller countries and regions from the new duty, including smaller producers such as the Philippines, Pakistan and Myanmar.

Today's decision will drastically reduce imports from top growers such as Brazil and Thailand as it will close the big gap between Chinese sugar prices - currently double those on the London market - and international prices. However, according to traders, the higher tariffs will also likely spur increased smuggling across China's southern border, while some imports from major producers may be shipped through third-party nations excluded from the tariffs.

While China has traditionally been a low-cost farming powerhouse, sugar is one of the few commodities where China struggles to compete given the higher costs of its smallholder farmers, who produce about 10.5 million tonnes of cane and beet sugar a year. The country then imports another 3 million tonnes a year, even as Beijing has been trying to crack down on illegal shipments of as much as 2 million tonnes a year, Reuters reports. Which is why today's move has prompted some consternation: "while smuggling has temporarily slowed, there is a risk that the incentives for smuggling are still strong and in fact could increase if domestic prices rise," said Tom McNeill, director of Green Pool Commodities in Brisbane.

Another reason why the tariff may backfire: it won't take a big drop in sugar prices to offset the tariff's impact: "Of course it will support the domestic industry for a short time," said a China-based trader. "(But) the global raw sugar market just needs to drop a little below 15 cents" to make it profitable to import into China. Worse, Beijing may have no choice but to intervene directly in the domestic market by selling some of its state reserves to prevent supplies tightening and prices spiking.

In response to the tariff, sugar futures initially fell more than 1% as traders interpreted the move, which was in line with a draft proposal issued in April, as too lenient to staunch shipments.

Thailand, the world's third largest producer, played down the impact of the duty. Its millers have a much lower shipping cost to China than rivals, Brazil and Australia, said Viboon Panitwong, chairman of the Thai Sugar Millers Corp Ltd, who did not expect the duty to significantly affect sugar exports. Thailand exports about 300,000 to 400,000 tonnes of sugar to China a year.

Ultimately, China's decision is unlikely to do much to defend its domestic infustry, at least until an even higher tariff is imposed by Beijing, and the downstream effects impact global prices. It is however notable that the country which recently spoke of itself as the flag-bearer for new and improved globalization, promptly engaged in precisely the kinds of protectionist measures that it blasted the Trump administration for proposing.

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LawsofPhysics's picture

Hmmm...  trade wars on food will most certainly hurt countries with higher, denser, populations....

 

 

It's almost as if the people in charge want to intentionally lower the human population...

 


Creepy_Azz_Crackaah's picture

China must have hired Bill de Blasio as a consultant.  Sugar ban!!!

Sum ting wong.  U tu phat.

knukles's picture

They're learning pseudo-capital-totalitarianizm from the west!
And now some racists are claiming that man evolved in Europe, not Africa  (Europe, not the EU)
So that leaves the Chinks out in the cold building railroads, don't it?

http://www.telegraph.co.uk/science/2017/05/22/europe-birthplace-mankind-...

random999's picture

so this affects sugar containing products also or just pure sugar?

Antifaschistische's picture

so....they're taxing the one thing no one needs any more of.   

Hey china, you should put a 95% tax on McDonalds hamburgers, KFC, Pizza Hut and Burger King......or, did America.corp sufficiently funnel a hundred mill to the appropriate oligarchs with their families already transplanted in San Marino, California.

....okay.  mission accomplished.

mary mary's picture

Good!

Thomas Jefferson: "When we are as crowded into cities as the people of EUROPE, we will have as few freedoms as the people of EUROPE".

ScratInTheHat's picture

China’s domestic producers raise their prices to just below the tariff price in 3…2…1. The people are going to love it! The Northern US States did the same thing to the South in the 1850’s and that worked out well!

sinbad2's picture

Maybe not, the US and EU subsidize their agricultural sector by many billions of dollars, it's hard to get a number, because they hide it.

But those subsidies whilst hurting producers in countries that don't subsidize, means consumers get cheaper food.

Rentier88's picture

Psst, China you need us more then we need you.  Trade war is one thing they can't win.

misalkin's picture

What for? USA has nothing  to offer to China but worthless dollars.

knukles's picture

But but but but.... I like filling the hole in my soul with cheap sparkly shit.

sinbad2's picture

WRONG.

The only sugar the US produces is subsidized stuff, and it certainly doesn't compete internationally.

What exactly does the US trade, apart from movies?

karenm's picture

Trade wars>>>>>> Real Wars

11b40's picture

Here is the key:

had "seriously damaged" the domestic industry.

Too bad the crooks who shipped our jobs off to China never took this into consideration as they packed up the factories, jobs, and tax base.

chosen's picture

Who gives a fuck?  Are sugar exports a big part of our economy?  I don't think so.

mary mary's picture

Sugar is an addictive drug.  Sugar creates obesity.  Sugar plantations destroy the environment.  Sugar is a slave-labor industry. 

knukles's picture

Sounds like a perfect crop for Democratic Party led nations ... the ones with all the slaves.  Cotton slaves, sugar slaves, vote slaves.....

Mike Rotsch's picture

You think anyone in China will notice that their dog isn't as sweet as it used to be?

youngman's picture

Going the way Of Venezuela....make them lose wieight by starving them...

jimymac's picture

Biggest single cause of increased Cancer. Smart move. Get it out of our food chain.