China’s tariffs of up to 15% on certain US food products like chicken, wheat, and corn in response to US President Donald Trump’s taxes on the country are “measured and targeted” and could leave space for future negotiations, say senior economists. However, they warn that the chance for a resolution is dwindling.

Global stock markets plummeted following the introduction of Trump’s tariffs of 25% on imports from Canada and Mexico and 20% against China, which he announced last month and came into effect this week. The US government maintains the levies have been imposed due to the illegal flow of fentanyl into the US, primarily from China and Mexico — a claim the countries reject.

China’s Ministry of Finance has issued countermeasures, including 15% taxes on chicken, wheat, corn, and cotton and an additional 10% tariff on sorghum, soybeans, pork and beef, aquatic products, fruits, vegetables, and dairy products.

In 2023, oilseeds and grains — crops such as soybeans, wheat, and corn — were the top US exports to China, worth US$18.5 billion. This figure was down by about 27% from the previous year.

In signs of potential for escalation in the trade war, China’s Ministry of Foreign Affairs has said it will “fight to the end” with the US in a “tariff war, trade war or any other war.” It is China’s most decisive wording on Trump since he became President. 

Muted response from China

US agricultural exports to China accounted for around US$25 billion in 2024, around 15% of total exports. According to ING research, it covers around 10% of goods targeted in the first round of countermeasures. However, industry analysts regard it as a muted response compared to the 10% broad-based tariffs implemented by the US.

Arjen van Dijkhuizen, senior economist for China at ABN AMRO, tells Food Ingredients First that China had already imposed 15% import tariffs on liquefied natural gas and coal imported from the US and 10% on crude oil and agricultural equipment in response to the first increase of 10% on all goods from China by the US.   

“China also took other measures, such as restricting exports of some rare earth metals and blacklisting some US firms, and has come with similar measures this time again,” he explains. 

“This makes it clear that China’s response is measured and targeted and not a fully proportional reaction in terms of counter-tariffs. By picking certain agricultural products, Beijing will likely aim to impact sentiment in agricultural-oriented states in the US, which form the traditional Trump fanbase.”

Van Dijkhuizen adds that China’s export share from the US has fallen to around 15% from 20% during the first trade war in 2018-19. 

He says: “It seems that Beijing has picked items that can also be sourced from other countries. All in all, the overall impact on Chinese inflation will likely be modest. By the way, note that China is currently not facing a problem of high, sticky inflation unlike Western economies - China’s CPI [Consumer Price Index] picked up in January but remains very low at 0.5% year-over-year.”

A narrow negotiation path

As part of the government’s announcement, China’s Ministry of Commerce added ten new companies to its “unreliable entities list.”

According to Lynn Song, chief economist for greater China at ING, China’s “restraint in retaliation” keeps negotiation possible, “but the path remains narrow.”

“Our initial take is that China’s countermeasures are still relatively measured for now. Along with the retaliation to the February tariffs, after both countermeasures have come into play, only around a quarter of US exports to China have been hit with tariffs,” he writes in a post for ING Think.

“New talks are unlikely to happen over the next week with the Two Sessions [annual parliamentary sessions] kicking off, but with key dates coming in April, markets will continue to monitor if the US and China can finally come to the table before then.”

Key moments in April

Song adds that the closer the trade tensions get toward April, key windows such as the end of the TikTok ban moratorium and Trump’s “reciprocal” tariff plans, the less likely it will be that there will be smaller piecemeal agreements, “but rather negotiations for a bigger deal or none at all.”

ABN AMRO’s van Dijkhuizen says the current measures still align with the bank’s base case for China, which assumes a gradual stepping up of US import tariffs on the country to an average rate of 45% (we are currently at around 30%).

“That said, we could have more tariffs in April as the US will then present the results of studies into the trade relationship and trade policies versus China. China could also be hit with future product-specific (non-country specific) tariffs. This could include cars, pharmaceuticals, steel, aluminum, cotton, etc, and or reciprocal tariffs that the US is expected to present in April,” he concludes.