Foreign Trade News: China'S Imposition Of 15% Tariff On American Cotton Has A Great Long-Term Impact

On March 3, 2025, the US government announced that it would impose a further 10% tariff on all Chinese goods exported to the US on the grounds of fentanyl. The unilateral imposition of tariffs by the United States has damaged the multilateral trading system, increased the burden on American enterprises and consumers, and undermined the foundation of economic and trade cooperation between China and the United States. According to the Tariff Law of the People's Republic of China, the Customs Law of the People's Republic of China, the Foreign Trade Law of the People's Republic of China and other laws and regulations as well as the basic principles of international law, with the approval of the State Council, from March 10, 2025, some imported goods originating in the United States will be subject to additional tariffs. Relevant matters are as follows: 1、 15% tariff will be levied on chicken, wheat, corn and cotton. 2、 10% tariff will be levied on sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables and dairy products. 3、 For imported goods originating from the United States listed in the annex, corresponding tariffs will be levied on the basis of the current applicable tariff rates. The current bonded and tax relief policies will remain unchanged, and the additional tariffs will not be exempted. 　　

According to the data from relevant institutions, China's cotton product imports have declined from 32% in 2018 to 22% of the U.S. market share in 2024, and China's direct exports of cotton products to the United States and Xinjiang have become scarce. Since February, the United States has imposed an additional 10% tariff on Chinese imports, but the amount of tax is small. Purchasing enterprises, foreign trade companies and factories have negotiated to bear part of the cost of additional tariffs. Orders and cooperation continue. However, since March 4, the United States has imposed an additional 10% tariff on Chinese goods, This measure will inevitably lead to further reduction of orders and profit margins for export-oriented manufacturers and export enterprises. However, considering that Xinjiang's direct export of cotton products accounts for a relatively small proportion, the negative effect of the US tariff increase has been basically diluted and digested. However, considering that the United States has imposed additional tariffs again, the cost of export commodities to the United States continues to rise, and the negative effect of foreign demand has a certain drag on the overall cotton consumption.

The direct result of China's imposition of 15% tariff on American cotton imports is a significant increase in the cost of American cotton imports. However, due to the substitution of Brazilian and Australian cotton, there has not been much change in the overall domestic import volume in 24/25 years. Data display, 2024 In 2007, China imported 876000 tons of American cotton, accounting for 33.44% of China's total cotton imports, while 1.102 million tons of cotton were imported from Brazil, accounting for 42.10%, Brazilian cotton is becoming the main source of domestic proportion. Therefore, for the domestic spot market, the benefits are relatively limited. However, as the import proportion of Brazilian cotton and Australian cotton continues to increase, the export share of American cotton continues to be seized, which is relatively negative for the futures and spot markets of American cotton.

Since June 1, 2022, the U.S. Customs and Border Protection Bureau has presumed all products produced in Xinjiang, China, as so-called "forced labor" products in accordance with the so-called Xinjiang related Act of the U.S. Chamber of Commerce, and prohibited the import of any products related to Xinjiang. It requires U.S. import enterprises to provide a full set of traceability materials. Therefore, China's direct export of cotton products to the United States is mainly to purchase imported cotton The textile and clothing produced in China, such as imported yarn, are relatively rare in Xinjiang.

In 24/25, China's import of American cotton was at a multi-year low

As of February 20, the cumulative contracted volume of American cotton in 24/25 years was 2.25 million tons, 7% lower than that of the previous year; Among them, China's cumulative contracted volume was 191000 tons, a year-on-year decrease of 80%. In 24/25, China's purchase of American cotton was very restrained, and China's signing of American cotton was at the lowest level in nearly a decade. In most years, China's purchase of American cotton was about 500000 to 800000 tons, and in high years, it was about 1 million tons. So far this year, the cumulative signing of American cotton is only 190000 tons.

In 23/24, China imported 3.24 million tons of cotton annually, which was more active in purchasing American cotton and Brazilian cotton, and the domestic reserve was also supplemented; In 2024, the overall demand for cotton spinning will be weak and the profit will be poor; The domestic cotton output increased significantly in 24/25, the amount of sliding allowance tax in 2024 was low, and the domestic demand peak season continued to be weak. Overlapping the changes in Sino US relations, the market was very cautious about the purchase of American cotton.

China's imposition of tariffs on American cotton will further curb the import demand of American cotton, or increase the leverage for subsequent negotiations between China and the United States. At present, the tariff increase on American cotton will not cause tension in domestic supply in the short term, but the long-term impact is still large.

As one of the counter-measures against the United States, China has imposed a 15% tariff on American cotton. Judging from the current production of China, as well as the situation of other major producers Brazil and Australia, it will not have too much impact on China's supply in 24/25 years. In addition, the reserve inventory has also been supplemented in 23/24 years, which can also be a potential source of domestic supply. But in the long run, China's imposition of tariffs on American cotton may have a greater impact on long-term imports. After all, the United States is one of the world's major cotton exporters.