President Trump lifts tariffs on 447 Chinese imports
September 24, 2019 Category Foreign trade, Weekly
China’s Vice Minister of Finance Liao Min
U.S. President Donald Trump has temporarily exempt tariffs on 447 Chinese import products – which he imposed last year – as he asserted progress was made in the trade negotiations with China. Recently, China also agreed to resume purchases of American farm products. The U.S. list of exempted products includes printed circuit boards, dog collars, laminated wood flooring, miniature Christmas lights, certain single-speed bikes, various types of pumps, heat exchangers, compressors, chest-type coolers, upright freezers and household water filter cartridges. Exclusions from a total product list of USD34 billion will apply retroactively from July 6, 2018; exclusions from a USD16 billion list will apply retroactively from August 23, 2018; and exclusions from a USD200 billion list will apply retroactively from September 24, 2018. The exclusions will last for a year for products from the USD34 billion and USD16 billion product lists, but only until August 7, 2020 for products from the USD200 billion product list.
A U.S. Chamber of Commerce’s survey shows that 40% of midsize company leaders say Trump’s tariffs on imported goods are posing challenges for their business. “Rising tariffs and policy uncertainty are preventing midsize businesses – who employ millions of Americans – from investing and growing,” Neil Bradley, the Chamber’s Executive Vice President and Chief Policy Officer, said in a statement.
Meanwhile, China’s Vice Minister of Finance Liao Min led a delegation to the United States for talks to prepare the meeting of top negotiators planned for early October. He set out China’s agenda for the October talks, including items that were not negotiable. Liao is also a Deputy Director of the Office of the Central Commission for Financial and Economic Affairs, a Communist Party organ in charge of supervising economic work. It is the first time he has taken a lead role in the trade talks. He was appointed in May last year as Deputy to Vice Premier Liu He, China’s leading negotiator in the trade talks.
The prospect of a substantive agreement in October remained in the balance. A diplomatic source said Beijing’s priority was to ensure a smooth celebration of the 70th anniversary of the founding of the People’s Republic of China on October 1. As such, it could be expected to toughen its position after the anniversary, making an agreement more difficult to reach.
Prospects that the two countries would reach a comprehensive trade deal are still slim. China’s Vice Minister of Agriculture and Rural Affairs Han Jun and a team of trade officials canceled a visit to U.S. farming states Montana and Nebraska due to a change in their travel schedule and returned to Beijing earlier than planned.
According to U.S. Chamber of Commerce Chief Executive Tom Donohue, U.S. Trade Representative Robert Lighthizer told the Chamber that there was still much work to be done to reach a trade deal with China, while he did not mention the possibility of an interim deal that could de-escalate trade tensions by further delaying tariff escalations. Negotiations broke down in early May after the U.S. side said the Chinese government had rejected American demands that it enshrines in domestic law major changes to address core U.S. concerns about intellectual property and forced technology transfer.
The U.S. government will need to agree to talks with Huawei Technologies as part of a future trade deal with China, according to Andy Purdy, Huawei’s Chief Security Officer. Huawei is regarded by some as a bargaining chip in the negotiations. He said the U.S. crackdown against Huawei is hurting American technology companies and workers more than the Chinese company. He said Huawei spent USD11 billion on U.S. supplies last year and that an estimated 40,000 U.S. jobs depend on its business. Huawei wants “transparent mechanisms” for evaluating its equipment and that of its competitors, which would build “trust through verification”, Purdy said, as reported by the South China Morning Post.
It remains to be seen whether U.S. President Donald Trump will increase tariffs on USD250 billion worth of Chinese goods from 25% to 30% in mid-October after a two-week delay. If he goes ahead, this could further derail the trade talks. Trump has also warned Beijing to agree to a trade agreement before the American presidential election next year. “I think there’ll be a deal maybe soon, maybe before the election, or one day after the election. And if it’s after the election, it’ll be a deal like you’ve never seen, it’ll be the greatest deal ever and China knows that,” Trump said aboard Air Force One. “If it’s after the election, it’ll be the toughest deal anybody’s ever had to make from the standpoint of China, and they know that. China knows that,” Trump added.
Despite the trade war, China’s non-financial outbound direct investment (ODI) maintained steady growth in the first eight months of this year, increasing 2.7% to CNY493.09 billion, injected into 4,659 companies in 159 countries and regions. By the end of August, the number of Chinese employees working abroad reached 999,000, an increase of 5,000 over a year earlier.
In another development partly influenced by the trade war and the slowing economy, financial assets held by Chinese households dropped last year for the first time since the turn of the century, according to a report by Allianz. The country dropped three places to 34th in the global ranking of richest countries by financial assets per capita. Meanwhile, loans held by Chinese households grew 18.2% year-on-year, the highest among all countries in the region.
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