Will US tariffs on China drop significantly? Daqing and Tongling become new foreign trade protagonists

Abstract:

Daqing, Heilongjiang, and Tongling, Anhui—one in the far northeast and the other deep inland—have both joined the ranks of China's most "foreign trade-dependent" cities. Why? And how will they face this tariff storm?

 

By | Shushu

Edited by | Tang

→This is the 1492nd original article of "Global Zero Carbon"

 

On April 15, the White House announced that the highest tariffs currently facing China have reached 245%. In response, the Ministry of Foreign Affairs stated: At this stage, these excessively high tariffs have become a numbers game and have no practical economic significance.

 

On April 22, Trump softened his stance, stating that US tariffs on China would "significantly" decrease and that China would be very satisfied with the final tariff rates.

 

Under this irrational tariff storm initiated by the US, products bearing the Made in China label have lost their fair competitive opportunities, and foreign trade cities are unable to remain unaffected.

 

The following list of China's city foreign trade dependence reveals which cities will be pushed to the forefront.

 

Source: Local statistics departments (some tier 4 and 5 cities not included in the statistics)

Produced by: Global Zero Carbon

 

Foreign trade dependence is usually measured by the "ratio of total import and export value to GDP", reflecting the degree of a region's economic openness to the outside world. The higher this ratio, the closer the region's connection to the international market, the higher the level of internationalization, and also the more vulnerable it is to global geopolitical fluctuations.

 

Among the top 20 cities, most are located in the eastern coastal region, near ports, with a strong manufacturing base. They are both major foreign trade cities and industrial powerhouses.

 

This also confirms a basic logic of the globalized era: those with a coastline and ports are closer to international markets. Therefore, coastal cities have become the main force in foreign trade.

 

However, unexpectedly, the list also includes two "outliers": Daqing in Heilongjiang and Tongling in Anhui. One is far in the northeast, and the other is deep inland, yet both are highly connected to the international market, both ranking among the cities most "dependent on foreign trade". What are the reasons behind this?

 

Based on 2024 import and export data, both cities share a commonality: import volumes far exceed exports. Last year, Daqing imported 148.6 billion yuan and exported only 6.9 billion yuan; Tongling imported 79.32 billion yuan and exported 18.6 billion yuan.

 

Source: Local statistics departments

Produced by: Global Zero Carbon

 

More interestingly, the import and export commodity structures of the two cities also differ from those of traditional coastal foreign trade powerhouses: Daqing relies on crude oil imports, with exports concentrated in organic chemical products; Tongling focuses on copper ore and concentrate imports, and exports unwrought copper and copper products and electromechanical products.

 

It is not difficult to see that both cities are mainly import-oriented for resource-based commodities, but this is precisely the key to their deep integration with the international market: oil and key minerals.

 

Through the special resources of these two cities, we can get a glimpse of the new role of China's resource-based cities in the foreign trade landscape.

 

Daqing is China's largest oil city. For 60 years, since the discovery of the oil field, Daqing has transformed from a barren land into an important energy city with a population of nearly 3 million and a GDP of over 280 billion yuan.

 

Illustration: Daqing Oilfield

Source: China Daily

 

However, as China has become the world's largest manufacturer, oil consumption has continued to climb. At this point, the Daqing oil field, which has supplied oil for more than half a century, is on the verge of being "exhausted," with production declining year by year, making stable production difficult.

 

Therefore, to meet the energy needs of industrial development, China has become a super buyer in the international crude oil market, with imports accounting for a quarter of global imports and once becoming the second largest export market for US crude oil.

 

However, oil and natural gas are often among the first products to be affected by tariffs. Prior to "reciprocal tariffs", to counter the US's imposition of a 10% tariff on Chinese products exported to the US, China has already imposed a 15% or 10% tariff on certain imported goods originating from the US, including oil and natural gas imported from the US.

 

Industry insiders believe that if the US does not cancel its high tariff policy, China will no longer import US-produced crude oil and natural gas.

 

This may fundamentally change China's energy import landscape in the future. According to data released by the General Administration of Customs in 2024, China's crude oil imports from Russia reached a record high of 2.17 million barrels per day, making it China's largest crude oil supplier.

 

At the same time, Daqing's role will also undergo a huge transformation. As the terminal city of the China-Russia oil pipeline, Daqing is not only a recipient of crude oil, but also undertakes multiple functions such as refining, processing, storage and transportation. This means that Daqing has transformed from an "oil-producing city" to a "crude oil import and refining hub".

 

This is the most important reason why Daqing, located in the northeast, can occupy a place on the foreign trade dependence list thanks to its unique energy strategic position.

Similar to Daqing, Tongling's "entry" is not accidental.

 

Illustration: Tongling Cityscape

Source: Xinhua News Agency

 

As an important non-ferrous metal base in China, Tongling has prospered because of copper and is known as the "Copper Capital", being one of the largest producers of cathode copper in the country.

 

Tongling Nonferrous Metals Jin Guan Copper Industry, as the country's largest single copper smelting plant, can process 2.48 million tons of copper concentrate and has a cathode copper production capacity of 600,000 tons annually.

 

The production of cathode copper generally involves the mining, leaching, and electrolysis of copper ore. Due to its excellent conductivity and processability, cathode copper has been mainly used in construction, infrastructure, industrial manufacturing, and transportation.

 

With the rapid development of the new energy vehicle and photovoltaic industries, global copper consumption increases by 3 million tons annually, making copper an important strategic resource.

 

At the same time, the development of the new energy industry places higher demands on copper processing. For example, the copper density in new energy vehicles is 4 times that of traditional vehicles, and new energy power generation is 2 to 3 times the copper density of traditional fossil fuel power generation.

 

Tongling's industrial structure is also adapting to this trend, gradually upgrading towards deep processing and high-end products, developing a series of high-end copper-based new materials.

 

However, Tongling's copper industry is mainly completed through a chain structure of "resource-smelting-refining-export." Smelting is an important link completed locally, but it is more dependent on the upstream "resources."

 

Statistics show that Chile and Peru are the world's first and second largest copper ore producers and exporters, respectively. China is the world's largest importer of copper ore.

 

This is the important reason why Tongling is among the list of foreign trade dependence, but it also means that its resource structure is highly dependent on the international market and is easily affected by fluctuations in mineral prices or geopolitical changes.

 

This risk is becoming increasingly real. Although copper was exempted from the "reciprocal tariffs" this time, because tariffs have increased the prices of American products and demand has fallen, many export orders have also been affected, and copper demand expectations have fallen accordingly, thus becoming one of the commodities with the largest price drop affected by tariffs.

 

At the same time, in February this year, Trump asked the US Department of Commerce to conduct a "232 investigation" into the situation of US copper imports, which means that the US "tariff stick" may have been aimed at copper.

 

Once the "copper tariff" is implemented, it may lead to higher copper prices in the US market, creating a price difference with copper prices outside the US, global copper inventories shifting to the US, and a reduction in the amount of copper flowing to countries and regions such as China, the Eurozone, and Southeast Asia, leading to tight copper supply.

 

Figure: COMEX copper, LME copper price trend and price difference change (USD/ton)

Data source: Wenhua Finance, Five Minerals Futures Research Center

 

From a "resource-based city" to a "strategic industrial fulcrum", under the tariffs, Tongling will also undergo a profound role transformation.

 

From this, it can be seen that the connection between Daqing, Tongling and the world is more in the form of a "raw material transit station" or an "industrial raw material deep processing base", becoming an important node connecting international resources and domestic industries.

 

There are many similar resource-based cities, such as Baotou, the capital of rare earths, Ganzhou, a cluster of rare metal industries, and Yibin, which is rich in lithium resources. They may also become new "key variables" in the future foreign trade pattern.

 

In addition, under the tariff war, China's urban pattern may also be changed, and a number of non-coastal cities will rise, becoming fulcrums for driving economic growth.

 

The reason is that when "globalization is over", the new development pattern with domestic circulation as the main body and domestic and international double circulations promoting each other becomes more important. The state has successively proposed "optimizing major productivity layouts, strengthening the construction of national strategic hinterlands", and "constructing national strategic hinterlands and key industrial backups."

 

For example, the southwest region is experiencing an accelerated layout of the lithium battery industry. Sichuan, Chongqing, and Guizhou not only have undertaken a large number of industrial transfer projects in the new energy industry, but also are promoting the efficient connection of railway transportation and China-Europe freight trains to open up export channels.

 

This not only makes up for the long-standing "difficulty in going to sea" shortcomings in inland areas, but also creates conditions for local high-value-added products such as lithium batteries to enter the global market. In the future, the competitiveness of the southwest lithium battery industry is expected to surpass that of central China, South China, and even the traditionally more advantageous East China region in certain aspects.

 

Although the tariff war has brought shocks to many cities, it has also provided opportunities for some cities to rise. Global industrial restructuring, inland small cities are about to come on stage.