China and US agree to lift some tariffs in sign of trade war thaw

Beijing says negotiators would like to reduce levies in phases

China and the US have agreed in principle to remove some tariffs imposed in the trade dispute between the two countries, Beijing has said, hinting that a potential trade truce could go beyond a freeze on new duties.

Officials from the world’s two largest economies are working on the terms of a trade ceasefire to be signed in the coming weeks by Donald Trump, the US president, and Xi Jinping, his Chinese counterpart.

Commerce ministry spokesperson Gao Feng told reporters in Beijing on Thursday that negotiators from both sides had agreed “to remove some of the additional tariffs in phases”, according to China’s state media.

Removing tariffs gradually “can help to stabilise market expectations”, he added. “As for how much will be eliminated in the first phase, that will depend on the content of the phase one agreement,” he said.

Markets were boosted by the comments, with analysts suggesting China had shifted from its demand that the US should remove all existing levies as a precondition of any trade deal.

Hong Kong’s Hang Seng index closed 0.6 per cent higher and S&P 500 futures were up 0.4 per cent.

The onshore renminbi, which is permitted to trade 2 per cent either side of a daily midpoint set by the People’s Bank of China, closed 0.1 per cent stronger against the dollar.

Currency and equity markets also rallied after the Financial Times reported this week that the US was considering removing a round of tariffs it imposed on $112bn of Chinese goods in September.

Tu Xinquan, a professor at the University of International Business and Economics in Beijing, said China’s comments were a positive signal. “It’s the first time the US compromises on tariffs,” he said.

The commerce ministry has previously said trade tensions would only end when all additional tariffs were lifted from Chinese products.

“Beijing has stepped back a little bit by not insisting on having to get all the tariffs cancelled,” said Zhu Feng, a professor of international relations at Nanjing University.

But he suggested Beijing might not be satisfied with Washington’s offer only to lift duties that it imposed in September. “They are showing their resilience. I think that they would want more than just the latest tariffs,” said Mr Zhu.

Both Beijing and Washington are under growing pressure to reach an interim deal. Mr Trump is eager to show US voters that his confrontational approach to China has succeeded ahead of presidential elections next year, while Beijing is suffering from a marked economic slowdown.

If a major rollback of existing levies were a part of a trade truce, the deal would have a broader beneficial economic impact at a time when officials around the world are fretting about a global slowdown.

Also on Thursday, a Chinese court jailed nine people, one of whom received a suspended death sentence, on charges of smuggling the opioid fentanyl into the US. The case is the first on which the two countries have worked together.

Washington has repeatedly criticised Beijing for not making sufficient efforts to stem the flow of fentanyl and its chemical precursors, which are often manufactured in China. Beijing said the cases were not connected to the trade war.