Ginseng fetches more in China when it is sold in boxes emblazoned with the stars and stripes of the American flag. That makes the prized medicinal root a fitting symbol for a trade skirmish that could disproportionately impact farming communities in the US heartland.
China’s tit-for-tat retaliation for Washington’s tariffs on steel and aluminium will affect roughly $3bn in US products, and comes as both sides prepare for the Trump administration’s threatened tariffs on high-tech Chinese manufacturing.
American trade promoters have warned that Chinese retaliation could hit large-volume US exports, especially soyabeans, grown in heartland states that voted for the New York real estate developer. Beijing’s more targeted tariffs are likely to have a similar effect, while hurting China far less in return.
Of the 128 items on the Chinese list, almost 90 are luxury agricultural products such as dried fruit, nuts and ginseng. Another 32 items involve specialised steel products used in oil and gas production and transport — an area in which influential Chinese state-owned mills have invested in recent years. The others target pork and scrap aluminium.
“Each item is small, not a great volume, but it shows China’s attitude. If the US persists, China has the ability to reciprocate,” says Zhang Monan, senior fellow at the China Center for International Economic Exchanges. The $3bn in trade affected by Sunday’s announcement pales in comparison with the $14bn annual trade in soyabean shipments from the US to China, she notes.
With such a targeted response, it appears that China is attempting to fend off a much broader US action on electronics and other manufactured goods that are a mainstay of the Chinese industrial economy. Liu He, China’s US envoy, is in regular talks with White House officials to head off Mr Trump’s threats to act unless the bilateral trade deficit narrows by $100bn.
Imposing tariffs on soyabeans, the primary ingredient for cooking oil and pig feed in China, would ultimately raise inflation on the mainland. By contrast, the specialty products targeted in this round of tariffs have little impact on poorer Chinese but could impact certain US communities.
Take ginseng. Centuries ago, overharvesting wiped out the Asian variant on the Korean peninsula and north-east China. After sharp-eyed Jesuits noted a similar plant in the American woodlands, fur traders including legendary pioneer Daniel Boone made a fortune selling ginseng to Qing Dynasty China. The wild plant is now rarely seen in American mountain forests, but its farmed variant is a mainstay for 140 families in Marathon county, Wisconsin.
“American” ginseng is now also grown in north-east China, thanks to seeds and technology transferred from growers in Wisconsin, the source of 95 per cent of farmed US ginseng. In fact, China is the world’s largest producer, by far. But ginseng shipped from America still fetches a 30 per cent premium to Chinese-grown “American” ginseng, largely due to higher quality.
“It’s a good thing. I for one, representing the ginseng industry, welcome the tariff on American ginseng,” says Ding Liqi, secretary-general of the ginseng chamber of commerce in Jilin province where 70 per cent of the Chinese crop is grown. “It’s definitely a great opportunity for local ginseng producers.”
By chance or by design, targeting agricultural specialty products reverberates as sharply as soyabeans would in the rural communities where Donald Trump carried the vote. In Wisconsin overall, Mr Trump beat Hillary Clinton by less than 1 percentage point, but in Marathon County he carried the day with 56 per cent, a gain of 4 percentage points over the Republican tally in 2012. Meanwhile, the Democrat share of the vote plummeted.
Tariffs on American pork exports help breeders in China, where pig prices are at a cyclical low. But they hit hard in Iowa, home to one-third of US pork production and the US ambassador to China, former governor Terry Branstad. Every county in Iowa saw sharp gains for Republicans in the 2016 compared with 2012.
Meanwhile, almonds, and other dried fruits and nuts hit by the Chinese tariffs, are staple products of California’s fertile but drought-prone Central Valley. Farmers there voted heavily for Mr Trump despite the state of California as a whole leaning Democrat.
China is the second most important destination for California almonds, according to the state’s almond board. It has overseen a doubling in almond acreage over the past two decades, as orchards replaced thirsty cotton fields.
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