China suspends additional tariffs on goods from US
Beijing and Washington reached the phase one deal on Friday
BEIJING: Beijing suspended additional tariffs on US products that had been due to kick in on Sunday, after Washington and Beijing announced a major thaw in their trade war on Friday.
China will suspend the planned addition of 10% and 5% tariffs on some US imports, and “continue to suspend additional tariffs on Us-made autos and spare parts”, China’s finance ministry announced Sunday. The move follows US President Trump’s cancellation of new tariffs on Chinese products as part of a “phase one” trade deal.
China’s commerce ministry said on Friday it had agreed with the US a mini-deal that includes a progressive rollback of tariffs and the protection of intellectual property rights.
The two sides have yet to sign the agreement, which represents a major breakthrough in the 21-month standoff between the world’s two largest economies.
In addition to existing tariffs, Trump had previously threatened to impose a 15% levy on Sunday on around $160 billion of Chinese exports, including popular US consumer goods like electronics and clothing.
China had said it would respond with a 25% tariff on US autos and a 5% tariff on auto parts—levies that were suspended earlier this year as a goodwill gesture.
However, tussles over the most controversial Chinese trade practices—including steep state subsidies—have been left to future talks.
The trade war launched nearly two years ago by President Trump isn’t over, analysts say, as there’s always the risk of Beijing not upholding its end of the bargain and the mercurial US leader throwing more tariff bombs.
The mini-deal is a “delay tactic to buy the Chinese Communist Party breathing space and allow it to stay in the game against overwhelming odds,” said Larry Ong, senior analyst with risk consultancy Sinoinsider. Growth of the Chinese economy slowed to 6% in the third quarter—its most sluggish rate in nearly three decades—as demand for exports cooled and Chinese consumers tightened their belts.
In November, exports fell 1.1% from a year earlier, the fourth straight fall, and exports to the US nosedived 23% as the trade war disrupted supply chains and left investors on edge.
Trump has cancelled a new round of tariffs that had been due to kick in on Sunday and would have affected smartphones, toys and laptops among other goods, while Beijing also called off levies planned in retaliation. In another major concession, Washington will also slash in half the 15% tariffs imposed on $120 billion in Chinese goods, like clothing, that were imposed on September 1.
However, this “unexpected” tariff rollback will only have a “marginal” impact on China’s economy, said Lu Ting of Nomura bank.
“The worst is not yet over and 2020 looks set to be yet another tough year.”
POSITIVE MOMENTUM
FOR EQUITY MARKETS
Equity markets are expected to sustain their positive momentum this week after the US and China reached their trade deal, analysts said.
“The recent developments on the global front have subsided the fear of prolonged crisis and that cheered the participants across the world markets including ours. And, we feel the positive momentum to extend further in the coming week too,” said Ajit Mishra, vice-president of research, Religare Broking.
The current market momentum can sustain this week as well, provided there is more clarity on the Us-china trade settlement, said Siddhartha Khemka, head of retail research, Motilal Oswal Financial Services.
PTI contributed to this story.