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China Defends Vital Potato Starch Sector in Escalating Trade War

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Last week, the EU began a review regarding the extension of anti-dumping tariffs on imported Chinese chamois leather.

Then yesterday, anti-dumping duties ranging from 26.3% to 69.7% were slapped on Chinese ceramic tiles.

This, on top of countervailing duties imposed on imports of Chinese copperplate last May.

Stung, China struck back with its first-ever countervailing duty "of up to 12 percent on EU potato starch because of unfair domestic subsidies," according to today's Shanghai Daily.

The Global Times provides further detail:

China on Friday said it would stick countervailing duties on potato starch from the European Union to protect Chinese producers, stacking the taxes atop of existing anti-dumping duties.

Importers of EU potato starch will from September 17 pay duties between 7.5 percent and 12.4 percent for five years, China's Ministry of Commerce said in a statement on its website.

"According to the results of the investigation ... subsidies exist for EU-produced imports of potato starch and China's domestic potato starch producers suffered substantial damage due to those subsidies," the statement said.

"Yo, don't f**k with my potato starch, man..."

Citic Securities analyst Xue Jun does not believe this sort of tit-for-tat behavior will produce positive results for any of the involved parties.

"A worsening global economic outlook, especially in the eurozone, is a source of more trade disputes. But protectionism will not help restore global economic health," Xue said.

Well, Xue had better get on the horn to the Australian Customs and Border Protection Service, because they've just started an investigation into the possible dumping of Chinese hollow steel pipe.

Gents, let's all take a deep breath and hash this out over a Coors Light. After all, we wouldn't want a repeat of 2010's metal fastener war.
POSITION:  No positions in stocks mentioned.