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China’s African swine fever outbreak and US trade war combine to create perfect storm for Chinese economy

China’s African swine fever outbreak and US trade war combine to create perfect storm for Chinese economy

When China levied additional tariffs on pork from the United States last year, Zhu Mengzhou, a manager of an imported food distributor in Guangzhou, was one of many traders who stopped buying it.

“Unless the tariffs are adjusted, the cost is too high for us,” Zhu said.

Even as an outbreak of African swine fever threatens to decimate China’s most important meat market, Zhu cannot afford to resume US purchases due to two rounds of trade war tariffs which added a total of 50 per cent to import duties. For some US pork products, Chinese buyers have to pay duties up to 70 per cent just to get them past customs.

Zhu and many other pork traders in China – as well as the US – are watching anxiously as negotiators from both sides iron out the finer points of a deal to end the trade war, potentially scaling back pork tariffs in the process.

China is desperately struggling to fill a market gap that could see as many as 200 million pigs lost to disease or slaughter, according to a worst-case scenario study from Rabobank, with African swine fever ripping through all 31 of its autonomous regions and provinces, from Tibet in the west to the tropical island of Hainan in the south, within just nine months.

The desperation is in stark contrast to years gone by. In 2017, China – by far the biggest producer and consumer of pork in the world – imported only 2 per cent of its total pork.

The outbreak arguably could not have happened at a worse time as the trade war and African swine fever epidemic have combined to exacerbate two of the biggest crises facing China’s economy. African swine fever has caused the most severe disruption to China’s pork industry in a decade, trimming 20 per cent of the national supply and driving up prices, while the trade war is acting as a drag on exports and manufacturing.

Given the need for China to import pork, expectations were high that pork tariffs would be at the top of the list of those to be removed in a trade deal, however, soybeans have threatened to further complicate the issue.