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China imposes additional tariff on U.S. cotton, how is the historical import situation?

2025-03-20 10:20:48 CCFGroup

Customs Tariff Commission of the State Council of China: China will impose additional tariffs on some products imported from the United States, effective from March 10, the Customs Tariff Commission said Tuesday. An additional 15-percent tariff will be imposed on imported chicken, wheat, corn and cotton originating from the United States, according to a statement from the commission. Sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables and dairy products will be subject to an additional 10-percent tariff. The statement comes after the U.S. imposition of an additional 10-percent tariff on products imported from China, effective from March 4.

We analyze the impact of this statement based on the historical context of China's tariffs on U.S. cotton and the import situation of U.S. cotton during the trade war.

1. Historical context of China's tariffs on imported U.S. cotton during the trade war

History of China to impose tariffs on U.S. cotton
Date	Reasons	China's countermeasures
16-Jun-28	On Jun 15, 2018, based on the unilateral findings of the Section 301 investigation, the U.S. government announced that it would impose an additional 25% tariff on $50 billion worth of goods originating from China. The tariff increase on approximately $34 billion of Chinese exports to the U.S. would take effect on July 6, while the tariff increase on the remaining approximately $16 billion worth of goods would be subject to further public comment.	China decided to impose retaliatory tariffs on imported goods originating from the United States, including soybeans, automobiles, and aquatic products, at a rate of 25%, involving approximately US$34 billion of Chinese imports from the United States in 2017. These measures would take effect on July 6, 2018. (Including cotton)
3-Aug-18	On July 10, 2018, U.S. time, the U.S. government announced that it would impose an additional 10% tariff on imported goods originating from China, affecting approximately $200 billion of Chinese product exports to the United States.	China imposed tariffs ranging from 25% to 5% on approximately US$60 billion worth of goods under 5,207 tariff items originating from the United States. (The tariff on cotton remained at the previous 25%)
23-Aug-19	On August 15, 2019, the U.S. government announced an additional 10% tariff on approximately $300 billion worth of goods imported from China, to be implemented in two batches starting September 1 and December 15, 2019.	China decided to impose tariffs on 5,078 tariff items, approximately US$75 billion worth of imported goods originating from the United States. Starting from 12:01 on December 15, 2019, an additional 10% tariff would be levied on the 749 tariff items listed in Part 1 of Annex 2, an additional 10% tariff would be levied on the 163 tariff items listed in Part 2 of Annex 2, an additional 5% tariff would be levied on the 634 tariff items listed in Part 3 of Annex 2, and an additional 5% tariff would be levied on the 1,815 tariff items listed in Part 4 of Annex 2. (Cotton is included in Part 3 of Annex 2)
17-Feb-20	From September and October 2019, the China-U.S. trade war gradually eased, and negotiations began. At the end of 2019, China purchased U.S. cotton.	The Customs Tariff Commission of the State Council decided to carry out a market-based procurement exclusion process for US-imposed tariff goods. Based on applications from relevant Chinese domestic enterprises, imported goods purchased from the United States in accordance with market-based and commercial principles, and meeting the requirements, would be exempted from the additional tariffs imposed by China's Section 301 countermeasures against the United States for a certain period. (Uncombed cotton was included, effective from March 2, 2020)

During the trade friction between China and the U.S. from 2018 to 2019, China imposed a 25% tariff on U.S. cotton starting July 6, 2018. In the statement on August 23, 2019, the Customs Tariff Commission of the State Council decided to impose an additional 5% tariff on the third part of Annex 2, effective from 12:00 PM on December 15, 2019 (including cotton). However, as the trade war gradually eased in September and October 2019, China began purchasing U.S. cotton by the end of 2019, and starting March 2, 2020, U.S. cotton was included in the exclusion list for retaliatory tariffs.

In March 2025, U.S. imposed the additional 10% tariff on China, and China took countermeasures, including an additional 15% tariff on the imported cotton from U.S. Based on the situation during the 2018-2019 trade war, if the U.S. continues to escalate tariffs, it is possible that China will further increase tariffs on U.S. cotton.

2. Historical import situation of U.S. cotton by China

In recent cotton marketing years, China's imports of U.S. cotton have consistently accounted for over 35% of total imports, with import volumes typically exceeding 500,000 tons. However, during the 2018/19 marketing year, amid the U.S.-China trade war, China's imports of U.S. cotton fell to 365,000 tons, representing only 18% of total imports, marking a historical low. In the same year, the proportion of Brazilian cotton imports surged, rising from 7% in the 2017/18 to 24% in 2018/19, and it has maintained a high proportion in the subsequent years.

U.S. cotton import situation of China (by cotton crop year)
Season, Unit: kt	imports of U.S. cotton	total imports	Proportion of U.S. cotton
2014/15	592.8	1674.6	35%
2015/16	190.1	958.8	20%
2016/17	504.5	1112.3	45%
2017/18	557.0	1323.2	42%
2018/19	364.7	2031.2	18%
2019/20	559.5	1603.4	35%
2020/21	1195.0	2746.6	44%
2021/22	999.2	1728.2	58%
2022/23	716.0	1424.5	50%
2023/24	1109.1	3236.2	34%
2024/25 (by Dec, 2024)	52.8	467.2	11%

As of February 20, 2025, the U.S. cotton export sales to China has totaled about 190,000 tons, and the total export shipments were 130,000 tons. According to the statement, goods that have been shipped from the origin before March 10, 2025, and imported between March 10 and April 12 will not incur the additional tariffs specified in this statement. Therefore, if the remaining sold but unshipped 60,000 tons of U.S. cotton begins shipping before March 10, it will not be subject to additional tariffs, while export sales signed and shipped after that date will be affected.

In terms of the Chinese domestic situation, the increase in tariffs on U.S. cotton by China may lead to a rise in the basis for U.S. cotton at ports in short term, while the reduction in imported U.S. cotton will affect the volume of imported cotton in the future. The domestic medium-term supply may improve, but in the medium to long term, the imports of Brazilian cotton, Australian cotton, and imported yarn can meet that demand. More importantly, the key influencing factor will still be the actual performance of end-user demand.

Regarding U.S. cotton, although it is already anticipated that the export sales of U.S. cotton to China will be low this season, the increase in tariffs has led to a further decline in the potential for export sales, weighing on ICE cotton futures market. Additionally, considering the historical trade frictions between China and the U.S., if the U.S. continues to escalate tariffs, it is possible that China may further increase the tariff rate on U.S. cotton.

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