BEIJING • China will halve tariffs on some US$75 billion (S$103.8 billion) of imports from the United States later this month, reciprocating a US action and likely satisfying part of an interim trade deal.
While the announcement yesterday comes about three weeks after the first phase of the trade pact was inked, it is also seen by analysts as a move by Beijing to boost confidence amid a coronavirus outbreak that has disrupted businesses and hit investor sentiment.
Casting doubts over the immediate outlook, however, was the prospect raised in a local media report that Beijing could invoke a disaster-related clause in the trade agreement, which might allow it to avoid repercussions even if it cannot fully meet the targeted purchases of US goods and services for this year.
The cuts will be effective from 1.01pm on Feb 14, Beijing time, according to a Ministry of Finance statement, the same time as when the US will implement already-announced reductions in tariffs on US$120 billion worth of Chinese products.
Chinese punitive tariffs on some 1,717 types of US goods that were adopted from Sept 1 last year will be lowered, with the rate on some dropping to 5 per cent from 10 per cent, and the others to 2.5 per cent from 5 per cent.
Other retaliatory tariffs China has imposed on US goods will remain, according to the statement. Further adjustments would depend on the development of the bilateral economic and trade situation, the ministry said.
"This like-for-like reduction is a reciprocal action, a consistent stance the Chinese government has adopted throughout the trade war," said ANZ chief economist for Greater China Raymond Yeung.
The reductions will cut tariffs on soya beans from 30 per cent to 27.5 per cent, although some traders say the impact could be limited as the 25 per cent tariffs remain in place. Duties on crude oil will fall to 2.5 per cent from the 5 per cent that was imposed in September.
"Any move to de-escalate is always good. Especially when the market is overwhelmed by the news about virus, good news about tariffs is refreshing," said Mr Tommy Xie, head of Greater China research at OCBC Bank in Singapore.
"The announcement shows China's commitment to implement the phase one trade deal despite the disruptions from the recent virus outbreak," he added.
The news was positive for financial markets and comes as Beijing seeks to shore up investor and business confidence in China as a virus outbreak casts deep uncertainty over the economic outlook.
The yuan hit its highest in two weeks, while Asian stocks and Wall Street futures also rallied after the announcement.
China's Finance Ministry said it hopes both sides can abide by the trade deal and implement it to boost market confidence, push bilateral trade development and aid global economic growth.
This like-for-like reduction is a reciprocal action, a consistent stance the Chinese government has adopted throughout the trade war.
ANZ CHIEF ECONOMIST FOR GREATER CHINA RAYMOND YEUNG, on the lowering of tariffs by the US and China on each other's goods.
While the proposed tariff cuts point to clear progress in US-China trade ties, the virus outbreak has cast doubt over just how soon the phase one deal could help China's slowing economy.
China's Global Times yesterday reported that Beijing is considering using a disaster-related clause in the deal due to the virus outbreak, citing an unnamed Chinese trade expert close to the government.
The phase one deal text contains a disaster clause that allows for implementation delays in the event of "natural disaster or other unforeseeable event".
US Agriculture Secretary Sonny Perdue on Wednesday warned that the US would have to be tolerant if the fast-spreading virus impaired China's ability to increase purchases of US farm products under the signed trade deal.
Some analysts had said following the trade deal that China may need to roll back some of the tariffs on US goods such as soya beans and crude oil in order to meet its purchasing commitments. Other analysts also noted that such moves are expected to cushion faltering growth at home.