Daily Management Review

China Reduces Tariffs On Certain US Goods By 50% Amidst Rising Virus Spread Concerns


Amidst the coronavirus scare and the death toll because of the virus rising, the Chinese government has announced reducing import tariffs on 1,717 goods from the United States by 50 per cent. The tariffs were introduced last year during the trade war with the US and they were lifted after the singing of the so called phase 1 trade deal between the two largest economies of the world.
While this measures is seen a Beijing keeping its promise of reducing tariffs as part of the phase 1 trade deal, analysts also view this move as being a measure by China to improve confidence in the country in the wake of worldwide concerns and fears of the rapid spread and destruction caused by the coronavirus in the country which has dented investor confidence in China. 
According to local Chinese media reports, Beijing is contemplating invoking a disaster-related clause in the trade agreement with the US which would allow China to avert any negative impacts of it not being able to fulfill the purchase targets of goods from the US for 2020 as mentioned in the trade agreement. Those reports cast a shadow over the immediate outlook of the Chinese economy.
Starting 0501 GMT on Feb. 14, additional tariffs levied on some goods will be cut to 5% from 10% and others lowered to 2.5% from 5%., said China’s finance ministry in a statement. Nothing about the value of the goods affected by the decision was mentioned by the ministry. However the products that would benefit from the reduced tariffs are among the $75 billion of goods that were brought under a tariff regimen of 5% to 10% tariffs last year by China which was brought into force from September 1.
The latest announcement by China is reciprocates the reduction of tariffs by the US on Chinese goods that are set to come into effect from February 14, said the Chinese finance ministry in a separate statement. The ministry said that the development of the bilateral economic and trade situation would dictate any further changes to the tariff regimen.
It is expected that the reduction will bring down tariffs on soybeans from 30% to 27.5% even though some traders believe that the effect of the latest measure from China could be limited because of the continuation of the 25% tariffs. \Duties on crude oil will fall to 2.5% from 5% that was imposed in September.
The interim phase one trade agreement also prompted China to postpone the remaining tariffs that were scheduled to come into effect from December 15.
“Any move to de-escalate is always good. Especially, when the market is overwhelmed by the news about virus, good news about tariff is refreshing,” said 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,” said Xie.