China is taking preemptive measures in the face of an impending trade war with the United States, expanding existing tariffs on a critical chemical used as a solvent, imposing sanctions on seven US companies on national security grounds, and threatening to stop buying semiconductors from the US.
China’s Ministry of Commerce (MoC) announced on December 27 that it would continue to impose anti-dumping duties on imports of 1-butanol from the US, Taiwan and Malaysia for another 5 years, effective from December 29, 2024. The MoC said that the removal of the duties would likely lead to a recurrence or continuation of dumping practices (by the US) and consequent injury to China’s domestic 1-butanol industry.
1-Butanol is a key organic chemical used in the production of various products, including paints, adhesives and plasticizers. On December 29, 2018, China imposed tariffs of 52.2%-139.3% on imports of 1-butanol from the United States and tariffs of 12.7%-26.7% on imports from Malaysia. A 56.1% tariff was imposed on all Taiwanese companies, except Formosa Plastics Corp, which will pay only 6%.
In 2022, China imported 105,400 tonnes (66% of the total) of 1-butanol from Taiwan and 37,300 tonnes (23.4% of the total) from Saudi Arabia, according to a report published by the Beijing-based Huajing Industry Research Institute. The remaining quantities came from Russia, South Africa and Malaysia. The report said that China’s 1-butanol suppliers lag behind foreign competitors in the quality of the good.
Taiwan Arms Sales
On Friday (December 27), China’s Foreign Ministry also imposed sanctions on seven US companies and their senior executives in retaliation for arms sales to Taiwan.
Beijing said its sanctions, based on China’s Anti-Foreign Interference Law, are also a response to the United States’ National Defense Authorization Act for fiscal year 2025, which includes many negative provisions for China.
It said the companies subject to the sanctions will now have their assets in China frozen and are now prohibited from doing business with Chinese companies and individuals.
The seven companies are: Insitu Inc, Hudson Technologies, Saronic Technologies, Raytheon Canada, Raytheon Australia, Aerkomm Inc and Oceaneering International Inc. These companies operate in a wide range of industries.
- Insitu is a manufacturer of unmanned flight systems and a subsidiary of defense company Boeing.
- Aerkomm is a satellite communications technology company.
- Oceaneering offers products and robotic solutions to the energy, defense, aerospace and manufacturing industries.
- The latest round of Chinese restrictions came after the Biden administration approved 19 weapons sales to Taiwan on December 20.
- The $295 million deal included upgraded tactical data link systems and weapon system mounts for Taiwanese ships.
On November 29, the Biden administration approved $385 million in new arms sales to Taiwan, including parts for U.S. F-16 fighter jets and radar systems due in 2025.
On December 5, China imposed sanctions on 13 U.S. companies involved in drones, artificial intelligence, and military communications, as well as six senior executives.
It noted that the sanctioned U.S. companies are now at a dead end as they cannot source high-quality mineral raw materials such as gallium, germanium, and antimony from China. Even if they can source these materials through third countries, they will have to pay an extremely high price. China will certainly demand that Trump stop selling weapons to Taiwan, but he will not easily compromise, which will translate into an increase in US arms sales to Taiwan.
Fair competition?
On December 23, the Office of the US Representative to the World Trade Organization said it would launch a Section 301 investigation targeting China’s dominance in core semiconductors and core processors and the impact on the US economy.
The China Council for the Promotion of International Trade (CCPIT), which is controlled by the Ministry of Commerce, said in a media briefing on December 27 that the investigation launched by the US into China’s semiconductor industry is a clear example of trade protectionism. Sun Xiao, a spokesman for the CCPIT, called on the US to comply with World Trade Organization (WTO) rules and immediately stop unilateral restrictions and promote industrial cooperation with China through dialogue and consultation.
It criticized the US for undermining fair competition in international trade by subsidizing its own semiconductor sector. The CCPIT did not specify what action it would take in retaliation, but it is apparently sending a message to the US that China can stop buying US goods if necessary.
Earlier this month, several Chinese industrial groups urged their members not to buy old US-made semiconductors due to “security” concerns after the US introduced new restrictions on processor exports against China.
