U.S. agriculture is in crosshairs of China’s tariff retaliation

China has American agricultural exports in its crosshairs as it prepares countermeasures against fresh U.S. import tariffs, China’s state-backed Global Times reported, raising the stakes in an escalating trade war between the world’s top two economies.

U.S. President Donald Trump last week threatened China with the extra 10 percent duty set to take effect on Tuesday, resulting in a cumulative 20 percent tariff. It accused Beijing of not doing enough to halt the flow of fentanyl into America, which China said was tantamount to “blackmail.”

“China is studying and formulating relevant countermeasures in response to the U.S. threat of imposing an additional 10 percent tariff on Chinese products under the pretext of fentanyl,” Global Times reported on Monday, citing an anonymous source.

“The countermeasures will likely include both tariffs and a series of non-tariff measures, and U.S. agricultural and food products will most likely be listed,” the report added.

China’s commerce ministry and the U.S. embassy in Beijing did not immediately respond to requests for comment.

China is the biggest market for U.S. farm and ranch products, and the agricultural sector has long been vulnerable to being used as a punching bag in times of trade tensions.

“Despite a decline in imports since 2018, any tariffs on key U.S. agricultural products like soybeans, meat, and grains could have a significant impact on U.S.-China trade as well as U.S. exporters and farmers,” said Genevieve Donnellon-May, a researcher at the Oxford Global Society.

“The U.S. agricultural sector has had time to prepare for a second Trump administration and trade war 2.0, with lessons learned from the first Trump administration,” she added. “So, in theory, it should be in a better place to find alternative markets. However, the reality may prove far more complex.”

China’s most active soymeal and rapeseed meal futures, already underpinned by a supply shortage, each surged 2.5 percent after the Global Times report. The soymeal contract on the Dalian Commodities Exchange hit its highest since Sept 30, 2024.

The world’s top agricultural importer and second-largest economy brought in $29.25 billion worth of U.S agriculture products in 2024, a 14 percent drop from a year earlier, extending a 20 percent decline seen in 2023.

Global Times, which is owned by the newspaper of the governing Communist Party, People’s Daily, was first to report the steps China planned to take in response to the European Union slapping tariffs on Chinese electric vehicles last year.

Trump’s announcement left Beijing with less than a week to come up with countermeasures or strike a deal. The proposed extra levies also coincide with the start to China’s annual meeting of parliament, a political set piece event at which Beijing is expected to roll out its 2025 economic priorities.

Trump tariffs to ‘backfire’

Analysts say Beijing still hopes to negotiate a truce with the Trump administration, but with no signs of any trade talks yet the prospect of a rapprochement between the two economic giants is fading.

“A China-U.S. trade war is not inevitable, but Trump’s decision to impose tariffs now is a bad decision,” said Wang Dong, executive director of the Institute for Global Cooperation and Understanding at Peking University.

“Trump and his advisors may think that imposing tariffs at this time is to put pressure on China, sending a signal, but this will backfire, and China will inevitably respond strongly.”

Tit-for-tat tariffs between the two countries during Trump’s first term set off a full-blown trade war, upending financial markets and hurting global growth.

This time around, Trump’s first salvo of fentanyl-related import duties on Feb. 4 was met by a quick retaliatory move by Beijing.

China announced a series of wide-ranging countermeasures targeting U.S. businesses, including Google and the owner of fashion brand Calvin Klein, and fresh import duties on U.S. coal, oil, and some autos.

China’s commerce ministry said on Friday that it hoped to return to negotiations with the U.S. as soon as possible, warning that failure to do so could trigger retaliation.

State media said top Chinese Communist Party officials met the same day and vowed to take steps to prevent any external shocks to China’s economy.

The Politburo meeting comes a week after the White House released an America First investment memorandum which placed China on a list of “foreign adversaries.”

Reporting by Joe Cash, Mei Mei Chu and Xiuhao Chen; Editing by Kim Coghill & Shri Navaratnam