China Hits U.S. With Levy on Chemical as Trade Tensions Rise

SINGAPORE—China slapped a levy on imports from the U.S. of a widely used chemical, a small salvo in an escalating trade dispute between Washington and Beijing.

China’s commerce ministry said imports of U.S.-made propionic acid would be subject to a levy of 43.5% after an investigation that began in July concluded the chemical was being dumped in China at rock-bottom prices and hurting Chinese producers as a result.

The two U.S. companies accused of dumping in the investigation—Dow and Eastman Chemical—didn’t immediately respond to requests for comment.

The move came just days after President Biden called for higher tariffs on Chinese steel and the U.S. began antidumping probes centered on China’s shipbuilding, maritime and logistics industries.

Treasury Secretary Janet Yellen has said China is threatening American jobs by flooding world markets with artificially low-priced goods, thanks to bulging industrial capacity and generous subsidies for manufacturing.

Beijing has rejected those accusations and says the U.S. is embracing protectionism when it should be boosting the global competitiveness of its own industries.

Trade relations between the world’s two biggest economies are expected to deteriorate further as their geopolitical rivalry intensifies. China is seeking to replace U.S. technology with homegrown alternatives, while the U.S. is leading a broader Western effort to revive domestic manufacturing and “derisk” supply chains that governments believe have grown overly dependent on China.

Rory Green, chief China economist at GlobalData TS Lombard in London, said the U.S.-China trade relationship does appear to be having one of its periodic lurches lower, driven in part by jockeying ahead of the U.S. election in November, in which trade with China is expected to be a flashpoint.

“That is not to let China off the hook. The economic drivers are still very strong,” he said, referring to China’s effort to rev up growth by investing even more heavily in manufacturing.

Propionic acid is a pungent chemical added to animal feed to prevent mold, and is also used in pesticides, herbicides and drug development.

The global market for propionic acid is small, worth around $1.3 billion in 2022, with China accounting for about a quarter of global consumption, according to market research firm Straits Research.

Dow and Eastman are among a handful of major producers located in Europe and the U.S. The only Western firm producing propionic acid in China is German chemical giant BASF, where it operates a joint venture with a local company, according to a 2023 report by ratings company S&P Global.

Chinese imports of U.S. propionic acid peaked in 2020 at around 35,000 metric tons, worth about $26 million, according to Chinese customs data. Last year, that sank to 12,500 metric tons.

Friday’s move by China to penalize imports of U.S.-made propionic acid is among a number of smaller steps each side has taken in the broader battle over trade.

China last year added some U.S. arms manufacturers to a list of “unreliable entities” prohibited from trade with China. Beijing in May banned major Chinese firms from buying products from chip maker Micron Technology, citing national security.

The U.S. in 2023 opened antisubsidy probes into aluminum, wine bottles and paper shopping bags from China and levied duties on Chinese-made pressure washers.

Xiao Xiao in Beijing contributed to this article.

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