China has increased tariffs on US ethanol and its by-product – distillers' dried grains (DDGS) – to protect its domestic industry, in a move that could escalate a trade dispute between the world's two largest economies.

In a ruling on 11 January, the Commerce Ministry announced that anti-dumping duties on DDGS – used for animal feed – would range from 42.2%-53.7%, up from 33.8% in its preliminary decision in September, Reuters reported. Anti-subsidy tariffs would range from 11.2%-12%, up from 10%-10.7 percent.

The decision comes 10 days after the Chinese government increased tariffs on imported US ethanol from 5% to 30%.

China said it found that its domestic DDGS industry had “suffered substantial harm” due to subsidised imports from the USA.

US Grains Council president and CEO Tom Sleight said the group was "deeply disappointed" by the news.

“While painful and damaging to the US DDGS industry, [the tariffs’] biggest negative impact will ultimately be on China’s feed and livestock industries, which risk losing access to an important and cost-effective feed ingredient.”

China is the world's top buyer of DDGS, purchasing almost all of its needs from the USA, the largest exporter, according to Reuters.

US companies hit by the new tariffs included global traders ADM and Louis Dreyfus, biofuel producer Poet LLC, oil refiner and ethanol producer Valero Energy Corp and grains group Andersons Inc, Reuters said.

The new tariffs will be in force for five years.