By Jacob Bunge and Mike Colias
Chip makers, auto makers and soybean farmers are among those
facing the brunt of tit-for-tat tariffs imposed by the U.S. and
China in unexpected ways.
President Donald Trump's plan to impose tariffs on about $50
billion of Chinese goods will force American semiconductor
companies to pay duties on their own products because of the
complexities of global supply chains, according to the
Semiconductor Industry Association.
Most chips American companies import from China are designed in
the U.S., and some of their components are made domestically before
they are shipped to the Asian country for assembly, testing and
packaging. The group called the tariffs "counterproductive."
Meanwhile, Beijing's retaliatory move to include American-made
vehicles on its list of goods subject to 25% tariffs means that the
reprieve auto makers appeared to have received last month, when
China said it would reduce import duties on cars, never got off the
ground. In May, China said that beginning July 1, it would cut
tariffs on vehicle imports to 15% from 25%, a longstanding rate, to
quell the Trump administration's complaints of a trade
imbalance.
German auto makers such as BMW AG and Daimler AG's
Mercedes-Benz, as well as electric-car maker Tesla Inc. and Ford
Motor Co., would have benefited from the lowering of Chinese
duties. Those companies collectively sold about 240,000 U.S.-built
vehicles in China last year, according to research firm LMC
Automotive.
The effect of tariffs on U.S.-bound autos made in China would be
more muted. Two car companies -- General Motors Co. and Zhejiang
Geely Holding Group Co.'s Volvo brand -- accounted for all of the
roughly 54,000 vehicles imported to the U.S. last year out of 17.2
million sold, LMC said. GM dealers last year sold about 40,000
China-made Buick Envision sport-utility vehicles, as well as a few
hundred Cadillac hybrid sedans, representing about 1% of GM's U.S.
sales.
Still, duties on Chinese imports would disrupt recent moves by
Ford and GM to use their Chinese factories to supply limited
numbers of cars to the U.S. Those arrangements allow the Detroit
companies to add new, niche models to U.S. showrooms while avoiding
capital outlays at their North American plants.
For American farmers, China's plan to slap levies on U.S.
soybeans is a problem many were hoping to avoid. With more than 90%
of this year's soybean crop already in the ground, farmers from
Arkansas to Wisconsin face being shut out of the world's biggest
market for the oilseeds, used to make animal feed and vegetable
oil.
Agribusiness firms that dominate crop exports, like Cargill
Inc., Archer Daniels Midland Co. and Bunge Ltd., which already have
seen soybean sales to Chinese buyers slow, may have to find
alternate markets for U.S.-grown oilseeds, if the duties prompt
China to increase purchases of Brazilian soybeans. The U.S. is the
second-largest soybean producer after Brazil, the U.S. Agriculture
Department estimates.
"Retaliatory measures will not solve the concerns raised by
these two governments," a Cargill spokeswoman said. "The impact of
trade conflict between the world's two largest economies will lead
to serious consequences for economic growth and job creation and
hurt those that are most vulnerable across the globe."
China's massive demand for soybeans has become a cornerstone for
the U.S. agricultural sector. Last year China imported about $14
billion worth of soybeans, nearly two-thirds of all U.S. soybean
exports, but a protracted trade battle could change that. An April
study by Purdue University estimated that a 25% tariff on U.S.
soybeans could cut American exports of the oilseed to China by 48%
or more and wind up shrinking U.S. production by 11% to 15%.
"The one thing we don't want to lose is China," said Davie
Stephens, vice president of the American Soybean Association,
speaking from the cab of his tractor as he planted soybeans near
Clinton, Ky.
Some industries managed to mute the impact of the tariff by
lobbying to have certain items excluded from the U.S.'s tariffs
list. The National Council of Textile Organizations said it managed
to get almost all textile machinery built in China excluded from
the tariff after it was included in the original list. The
machinery is used by U.S.-based fabric and yarn manufacturers and
would "hinder the competitiveness of U.S. textile manufacturers" if
it carried a tariff, said Auggie Tantillo, president of the textile
group.
The medical devices industry too will see a minor impact, on
about $836 million in medical devices and diagnostic-related
products that are imported from China, according to a spokesman for
AdvaMed, a U.S. trade group representing device-makers.
The administration's initial tariff proposal in April would have
affected $2.8 billion worth of medical-technology imports from
China, AdvaMed said. The U.S. imports about $6 billion in Chinese
medical devices annually, according to Glenn Novarro, an RBC
Capital Markets LLC analyst.
AdvaMed urged the U.S. trade representative to remove medical
technology from its list of targeted products, "due to concerns
about the adverse effects on our competitiveness, as well as
potential longer-term impact on patient access to medical
technology," the spokesman said in an email. In May, 40 U.S.
lawmakers signed a letter urging the administration to spare the
industry from the tariffs.
The efforts appeared to pay off, with the administration
removing or nearly removing products including defibrillators,
orthopedic implants and hearing aids, Mr. Novarro said in a note to
clients on Friday.
--Joseph Walker contributed to this article.
Write to Jacob Bunge at jacob.bunge@wsj.com and Mike Colias at
Mike.Colias@wsj.com
(END) Dow Jones Newswires
June 15, 2018 19:05 ET (23:05 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.