Trade war: China halts introduction of new tariffs on US goods
- Beijing holds fire on duties of 5 and 10 per cent that were set to take effect at noon on Sunday
- Move comes after US also shelves new tariffs and agrees to halve some of those already in place
China said on Sunday it will not impose new tariffs on imports of American products, but added that the ongoing negotiations between the two countries must proceed on the basis of equality and respect.
Beijing had threatened to introduce tariffs of 5 and 10 per cent on selected US goods at noon on Sunday, but that move had been halted, the Customs Tariff Commission of the State Council said in an online statement. It also said that US cars and car parts would continue to be exempted from existing duties.
China hoped it could continue to “work with the US on the basis of equality and mutual respect to address the concerns of both parties and promote the steady development of the China-US trade relations”, it said.
During the negotiations for a “phase one” deal, Beijing repeatedly called for the suspension of any tariff increases by the US on Chinese products and for existing duties to be lifted.
After weeks of debate and deliberation, Washington on Friday halted its plan to introduce fresh tariffs on the remaining US$100 billion worth of Chinese goods that were exempt from the punitive action, and said it would halve its existing duties on about US$120 billion of Chinese imports to 7.5 per cent.
However, a 25 per cent tariff on about US$250 billion worth of Chinese goods would remain in place, it said.
Why US-China trade talks aren’t yet out of the woods
Besides the removal of tariffs, the US said the “historic and enforceable” phase one deal would require China to make structural and other changes to its economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange.
“The phase one agreement also includes a commitment by China that it will make substantial additional purchases of US goods and services in the coming years,” the trade representative’s office said.
It also “establishes a strong dispute resolution system that ensures prompt and effective implementation and enforcement”, it said.
Despite the consensus, the deal had yet to be signed and was still undergoing final legal checks, China’s vice-minister for commerce Wang Shouwen said on Friday.
“We will begin negotiations on the Phase Two Deal immediately, rather than waiting until after the 2020 Election,” he said on Twitter.
Trade war breakthrough: US and China reach phase-one deal
Speaking at the Doha Forum on Saturday, US Treasury Secretary Steven Mnuchin said that as well as addressing several of the key issues on Washington’s trade agenda, the phase one deal would be good for the global economy.
“For a very long time the US was open to China, China was not open to the US,” he said.
“There were very strong restrictions and for the first- and second-largest economies in the world, there should be more trading back and forth and that’s what we’ve been working on. I think these agreements will not only be good for the US, but will be very good for global growth.”
The interim deal covered issues of intellectual property, technology transfers, the opening up of China’s financial services markets and Beijing’s commitment to buy more American agricultural and other goods, he said.
Yu Chunhai, deputy dean of Renmin University of China’s school of economics, said the two sides had been able to manage their differences by focusing on areas where it was easier to find consensus.
“Such an approach helped cement the current deal. It’s a good start,” he said.
And despite the trickier problems yet to be resolved – like the structural reforms demanded by Washington – China was ready to meet the challenges, Yu said.
“China has the motivation to make some institutional changes. There has been a lot of talk about deepening reforms since 2013, but no significant moves have been made,” he said.
“Now is the time for action. The changes are coming because of the demands and choices from within, not the pressure from the US.”
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Liu Xuezhi, a senior researcher with the Bank of Communications in Shanghai, said the phase one deal would help to diffuse tensions between the two countries.
“It will ease the pressure on the Chinese economy, exporters in particular,” he said.
But the negotiations would get tougher once the two sides began tackling the bigger issues on which they had clashed.
“It will become more difficult, and frictions could resurface,” he said.
Shen Jianguang, chief economist at JD Digits, said the deal had not only pushed the pause button on an escalating trade dispute but prevented it from deteriorating into a full-blown cold war.
“It has a certain significance in repairing the cracks in relations … [but] for the next step, China must ensure the deal is implemented to ensure a stable external environment,” he said.
Additional reporting by Reuters and CBC
