China: Cheap American grain is hurting our farmers

Country buys $960 million of sorghum per year

Larry Rana, USDA via Wikimedia Commons

HONG KONG (CNNMoney) - China is reminding the U.S. that it can play tough on trade, too.

Less than two weeks after President Donald Trump slapped new tariffs on imports of solar panels and washing machines, China has launched an investigation into a key U.S. agricultural export.

Chinese authorities said Sunday they would examine whether the U.S. is unfairly subsidizing exports of sorghum, a crop that is used to feed livestock and make a liquor that's very popular with Chinese drinkers.

Preliminary information showed "extensive dumping" of U.S. sorghum at lower than normal prices, China's Commerce Ministry said in a statement. That has caused "material injury" to Chinese farmers, it added.

China is the largest buyer of American sorghum products. It imported about $960 million worth last year, according to Chinese customs data.

"Sorghum is a good target for a trade dispute since it would have a major financial impact on the U.S.," said Loren Puette, director at ChinaAg, an agricultural research firm.

Squeezing the sorghum trade would hurt the U.S. rural economy, where Trump has a lot of support, he said. But other more significant exports grown by U.S. farmers are likely to escape action for now, Puette added.

China is the biggest buyer of American agricultural products, and a large part of that is soybeans. China bought $14 billion worth of them in 2016, according to the U.S. Department of Agriculture.

"This is likely just a warning to the U.S. that it should compromise on other trade issues," he said. "If China significantly restricted the import of U.S. soybeans, it would signal the beginning of a trade war."

That's something experts have been warning is an increasing risk. Trade tensions that simmered after Trump took office have started to intensify recently.

The Trump administration's decision to hike tariffs on solar components and washing machines last month had prompted fears that China could respond with tit-for-tat measures of its own.

Trump will decide on other potential trade sanctions against China in the coming months based on the results of U.S. investigations into steel, aluminum and intellectual property infringement.

China has taken measures against specific products like sorghum before. Last year, it imposed tariffs on U.S. exports of distiller dried grains, another livestock feed.

-- Nanlin Fang and Serenitie Wang contributed to this report.

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