June 19, 2019 / 6:13 AM / a month ago

UPDATE 2-China retains anti-dumping tariffs on U.S. distillers grains ahead of Trump-Xi talks

* Ending tariffs would hurt domestic sector - ministry

* Follows review launched amid Beijing-Washington trade talks

* Timing perplexes market as optimism for trade deal grows (Adds background; producer, trader comments)

BEIJING, June 19 (Reuters) - China’s Ministry of Commerce said on Wednesday it will maintain anti-dumping and anti-subsidy tariffs on imports of U.S. distillers grains (DDGs), a by-product of ethanol production used in animal feed, after closing a review launched in April.

In a statement the ministry cited potential damage to domestic producers in its decision to retain anti-dumping duties of 42.2%-53.7% and anti-subsidy tariffs of 11.2%-12% on DDGS products from the United States.

“U.S. DDGs products might re-enter Chinese market in large volume, and hit the domestic sector, if anti-dumping and anti-subsidy tariffs on the product were terminated,” the commerce ministry said in the statement on its website.

Beijing launched the review amid trade talks between Beijing and Washington aimed at ending the prolonged China-United States trade war that has roiled global markets.

Sino-U.S. trade tension escalated again in early May, with the two sides hiking up tariffs on each other’s products, virtually halting talks. But optimism that the row could be resolved had grown ahead of a meeting between Presidents Donald Trump and Xi Jinping next week.

With hopes for a trade deal rekindled, the timing of Wednesday’s move left some market participants perplexed.

“The result is expected but the timing to announce it is a little surprising,” said a manager at a major domestic ethanol and DDGs producer in China. He declined to be identified as he was not authorised to talk to media.

If a trade deal were to be agreed, it might see China moving to import a large volume of U.S. agriculture products - including DDGs.

“I think China is stating its attitude, saying ‘We are prepared. If you want a war, we can keep fighting’,” said a trader with a state-owned firm. The trader declined to be named due to the sensitivity of the matter.

China’s anti-dumping tariffs on U.S. DDGS were first implemented in 2016 at a rate of 33.8%. Imports of the feed ingredient from the United States fell sharply.

Anti-dumping duties were raised to the current level of 42.2%-53.7% in January 2017, while the anti-subsidy tariffs were raised to 11.2%-12% from 10.0%-10.7%.

China bought 3 million tonnes of DDGS in 2016, mainly from the United States and worth $684 million, according to Chinese customs data. Imports that year were down 55 percent from 2015. (Reporting by Muyu Xu, Hallie Gu and Shivani Singh; Editing by Kenneth Maxwell)

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