Late in the week, China announced it will likely have to cut in half on the additional—new–tariffs on $75 billion worth of US imports as the two biggest economies on the planet continue to retreat from a years-long trade war that has handicapped both countries. The economic impact of this feud, of course, has dented overall global growth but, more importantly, China is currently struggling to stay afloat thanks to escalating concerns of the coronavirus outbreak. So far, the disease has claimed 565 lives, most of which in China, and infected at least 28,000 people in more than 25 countries and world territories.
The impact of the virus on China has brought China to reconsider its trade arrangements and, as such, the new reduction will affect US goods with the new tariffs imposed by China last September. Starting next week, then, China will reduce these additional 10 percent tariffs back to their original rate, which was 5 percent. Other goods received a 5 percent tariff boost and these will be reduced to a levy of only 2.5 percent, as described in a statement from China’s State Council Tariff Commission.
On top of this, the commission notes that other US tariffs will continue as they are, for now, while they continue to work on potential exemptions.
In a statement, the commission said, “China hopes that both sides will abide by bilateral agreements and make an effort to implement relevant provisions so that we can boost market confidence, promote bilateral trade relations, and global economic growth.”
Oxford Economics economist Tommy Wu speculates that many have expected for China to make such a move in response to a similar gesture made by the United States, who cut a round of tariffs in September—also by half—as part of the “phase one” trade deal.
“Nevertheless,” Wu adds, “the announcement may help boost market sentiment, especially at a time when China is battling with the economic impact of the coronavirus outbreak.”
It seems that officials in Washington agree that the Wuhan outbreak could, effectively delay export efforts of US goods into China. This complicates matters, of course, as Beijing has already purchased $200 billion worth of US products as part of the same “phase one” trade deal.