China said Tuesday it will impose 10 percent duties on a host of U.S. products, including liquefied natural gas, threatening a booming Louisiana industry, and chemicals, Louisiana’s third-largest export to China and a major industry statewide.
The tariffs on $60 billion worth of U.S. exports to China go into effect later this month. The move came in response to the Trump administration imposing tariffs late Monday on $200 billion worth of Chinese-made goods starting next week.
Louisiana, a uniquely trade-sensitive state, already has seen 25 percent tariffs imposed on major exports like soybeans, and companies building big industrial facilities have complained about rising costs from U.S. tariffs on steel from China and other countries.
Soybeans are grown on 1 million acres in Louisiana and soybeans from other areas of the country pass through Louisiana ports and commercial facilities. Ranked No. 3 among U.S. ports for imported steel, a tariff-related dip in New Orleans imports could mean a loss of as much as $1 million for the first half of the year, officials have said.
China’s latest list of product tariffs included coffee, rice, honey and industrial chemicals, among others. The American Chemistry Council said China's retaliatory tariffs apply to $11 billion worth of U.S. chemicals and plastics exports, putting nearly 55,000 American jobs and $18 billion in domestic activity in question.
The tariffs from China ratchets up pressure on developers trying to build multibillion-dollar liquefied natural gas export facilities, particularly in southwest Louisiana. More than $90 billion in potential investments are planned for Louisiana alone from about a dozen companies. Those firms are competing for long-term contracts from overseas buyers, including from China.
“It’s going to continue to stall the development of LNG facilities in Louisiana until there’s more clarity on the issue,” said David Dismukes, head of LSU’s Center for Energy Studies.
China is an important growing market for imported natural gas. In 2017, when LNG exports ramped up at Cheniere Energy’s Sabine Pass terminal, China was the third-largest destination, behind Mexico and South Korea, according to the U.S. Energy Information Administration.
But European markets and other Asian countries also have emerged as big buyers of LNG, and some of the companies developing export facilities in Louisiana have signed deals with companies outside of China.
George Swift, head of the Southwest Louisiana Economic Development Alliance, said none of the projects eyeing the region have dropped out yet, and rising global demand from places other than China will continue to fuel the industry here.
“While China customers may be affected by the tariffs, we think there’s enough demand around the world,” Swift said.
LNG companies have scrambled to ink long-term contracts in order to get financing for the multibillion-dollar projects. The companies are aiming to put the facilities in service in the early 2020s to meet an expected peak global demand.
The construction of Cheniere Energy’s LNG facility at Sabine Pass, and Cameron LNG’s $10 billion project in Hackberry, have helped lift southwest Louisiana’s economy in recent years as part of a major industrial construction boom. Several more are in various stages of development.
Cheniere, the first company to begin exporting LNG from the U.S., has a long-term LNG contract in place with China. The company told S&P Global the tariffs would not impact its agreement.
S&P Global Platts reported from the Gastech conference in Barcelona that final investment decisions for some of the many planned Gulf Coast export projects could be threatened or delayed from the tariffs.
Economist Loren Scott said if the tariffs are a short-term measure, the effects will likely be limited. But if the Trump administration uses the tariffs as a protectionist measure in the long term, the national economy could be roiled.
“None of this stuff is good,” Scott said.
China's Finance Ministry said its tariff increases are aimed at curbing "trade friction" and the "unilateralism and protectionism of the United States."
There was no word on whether China would back out of trade talks it said it was invited to by the U.S., but a Chinese Commerce Ministry statement said the U.S. increase "brings new uncertainty to the consultations."
The two countries have already imposed import taxes on $50 billion worth of each other's goods. President Donald Trump has threatened to add an additional $267 billion in Chinese imports to the target list if China retaliated for the latest U.S. taxes. That would raise the total affected by U.S. penalties to $517 billion, covering nearly everything China sells to the United States.
The American Chamber of Commerce in China warned Tuesday that Washington is underestimating Beijing's determination to fight back.
"The downward spiral that we have previously warned about now seems certain to materialize," said William Zarit, the chamber's chairman.
At the root of the trade war are U.S. complaints about China's plans to try to overtake U.S. technological supremacy. Those plans include "Made in China 2025," which calls for creating powerful Chinese entities to compete in robotics and other fields. The U.S. says the plans are based on stolen U.S. technology, violate China's market-opening commitments and might erode American industrial leadership.
American companies and trading partners including the European Union and Japan have longstanding complaints about Chinese market barriers and industrial policy. But they object to Trump's tactics and warn the dispute could chill global economic growth and undermine international trade regulation.
Trump has strained relations with potential allies, including the European Union, Canada and Mexico, by raising tariffs on imported steel and aluminum. He demanded Canada and Mexico renegotiate the North American Free Trade Agreement to make it more favorable to the United States.
Trump also has complained about America's gaping trade deficit — $336 billion last year — with China, its biggest trading partner.
"China has had many opportunities to fully address our concerns," Trump said in a statement. "I urge China's leaders to take swift action to end their country's unfair trade practices."
The trade gap means China will run out of U.S. imports to tax while the U.S. still has plenty of Chinese imports to target. But Beijing has other ways to retaliate. American companies say regulators are already starting to disrupt their operations.
Last week, the American Chambers of Commerce in China and in Shanghai reported 52 percent of more than 430 companies that responded to a survey said they have faced slower customs clearance and increased inspections and bureaucratic procedures.
The U.S. taxes are targeting Chinese goods that Washington says have benefited from improper industrial policies. Beijing's tariffs have hit soybeans and other farm goods from states that voted for Trump in 2016.
"Contrary to views in Washington, China can — and will — dig its heels in and we are not optimistic about the prospect for a resolution in the short term," said Zarit of the American Chamber of Commerce. "No one will emerge victorious from this counter-productive cycle."
In the first two rounds of tariffs, the Trump administration took care to try to spare American consumers from the direct impact of the import taxes. The tariffs focused on industrial products, not on things Americans buy at the mall or via Amazon.
By expanding the list to $200 billion of Chinese products, Trump may spread the pain to ordinary households. The administration is targeting a variety of goods — from sockeye salmon to baseball gloves to bamboo mats — forcing U.S. companies to scramble for suppliers outside China, absorb the import taxes or pass along the cost to their customers.
The U.S. government did withdraw some items from its preliminary list of imports to be taxed, including child-safety products such as bicycle helmets. And in a victory for Apple Inc., the administration removed smart watches and some other consumer electronics products.
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