China to halve tariffs on $75bn of US imports
China said Thursday it would halve tariffs on $75 billion worth of US imports as part of its trade truce with Washington and as officials look to calm markets unnerved by the deadly virus outbreak.
The State Council Tariff Commission announced the reductions after Beijing and Washington signed an initial deal last month to dial down a long-running trade war that has hit the global economy.
It also comes a day after US President Donald Trump hailed relations between the superpowers as the “best” ever in his State of the Union address, with observers saying Beijing was likely keen to get moving on the next phase of talks towards a wider agreement.
China will cut levies of five and 10 per cent on more than 1,700 items starting February 14, the same day Washington is expected to halve tariffs on $120 billion worth of Chinese goods.
Products affected by the tariffs imposed in September include fresh seafood, poultry and soybeans as well as tungsten lamps for scientific and medical purposes, and some types of aircraft.
The move is aimed at “promoting the healthy and stable development of China-US economic and trade relations”, the Commission said in a statement.
“To alleviate economic and trade friction, and expand cooperation in these areas, China has also made relevant adjustments,” it added, referring to the US cuts. “We hope to work with the US towards the ultimate elimination of all increased tariffs.”
The Commission also said it “hopes that both parties will be able to abide by their agreement, strive to implement its relevant content, (and) boost market confidence”.
Other retaliatory tariffs, however, remain in place.
– ‘Minimal impact’ –
The economic powers in January signed a “phase one” deal that eased tensions in their bruising trade war, with Beijing agreeing to buy an additional $200 billion in US goods over the next two years.
As part of the phase one deal, the US said it would halve its tariffs on $120 billion of Chinese goods to 7.5 per cent, while Trump called off additional levies that would have taken effect last December.
Thursday’s announcement comes as China grapples with a shortage of resources as it struggles to combat the coronavirus, which has claimed more than 560 lives and infected more than 28,000.
On Tuesday, a White House economic advisor said the virus outbreak would delay Beijing’s plans to buy goods from the US under the deal.
But Treasury Secretary Steven Mnuchin said Thursday the US administration is “not worried about that”.
“I don’t expect there will be any issues in them from fulfilling their commitments,” he said in a television interview.
And while it is too early to gauge the economic impact, he said, “there’s no question that the virus will have some impact on global growth and some impact on the US.”
China’s outbreak has caused Beijing to impose travel restrictions across cities, with millions of consumers staying home during its otherwise busy Lunar New Year holiday.
The crisis is expected to hammer China’s already stuttering economy, as companies and factories delay the resumption of operations.
Over the weekend, Beijing announced that US imports that can be used in its fight against the deadly virus will also be exempted from retaliatory tariffs imposed in the trade war.
– ‘Sweet carrot’ –
AxiCorp chief market strategist Stephen Innes said the tariffs cut was a “small but rather a sweet carrot to dangle”.
“In the wake of the coronavirus economic tumult, it’s not much of a stretch to assume China is eager to start the negotiations,” he said.
Moody’s Analytics economist Xu Xiaochun told AFP a reduction in tariffs “makes sense” as China is expected to import more US goods as part of the phase one deal.
But the timing might be more than a coincidence.
“Perhaps it has got to do with market sentiment,” he said, noting that the Shanghai Composite and Shenzhen Composite indexes fell Monday when markets reopened after the recent holiday and reacted for the first time to the outbreak.
“It could be a case of China giving signals that it is working towards easing tensions and improving trade relations, so as to ease financial volatility and risk aversion in the stock markets,” he said.
Still Mnuchin said most US tariffs will remain in place as an incentive for Beijing to move on to the next phase of negotiations.
Since losing almost eight per cent on Monday, mainland Chinese markets have surged more than four per cent in the past three days, boosted by central bank support, bargain-buying and the tariffs announcement.FOLLOW US ON SOCIAL MEDIA