China announces new raft of US imports eligible for trade war tariff waivers amid rising superpower tensions

Date: Friday, May 15, 2020
Source: South China Morning Post

  • Second batch of trade war tariff exemptions covers 79 products, including ores, chemicals and certain medical products
  • Importers must apply for waivers within six months of the announcement, with the exclusion process active for one year from May 19

China has published a second batch of products to be exempt from US trade war tariffs, effective from next week for one year.

There are 79 products in total on the list published on Tuesday by the Ministry of Finance, including rare earth mineral ores, aircraft radar equipment, semiconductor parts, medical disinfectants, and a range of precious metals, chemical and petrochemical products.

Importers in China must apply to the General Administration of Customs within six months of the announcement to be considered for waivers, which are effective from May 19.

The first batch of exclusions were announced in September 2019, and included major agricultural commodities such as soybeans and pork, as well as petrochemical products.

The announcement comes at a heated moment for the United States and China, with sharpened rhetoric prevalent on both sides. US President Donald Trump last week threatened to tear up the phase one trade deal, signed in January, should China not increase its imports of US goods, as per the purchasing agreement element of the deal.

With supply chains on both sides severely disrupted by the coronavirus outbreak, bilateral trade shrunk in the first four months of the year.

China’s imports of US goods fell by 11.1 per cent in April, customs data released last week showed, and by a colossal 85.5 per cent in March. Given that China imported much fewer goods from China in 2019 than it did in 2017 – the baseline scenario used to map out the terms of the trade deal – it is not close to meeting the targets. It is estimated that China would have to double its monthly US imports to meet the lofty targets.

At a press conference in Beijing on Tuesday, Chinese Foreign Ministry spokesman Zhao Lijian said the two nations should implement the deal with equality and mutual respect, adding that it is beneficial for both sides, along with the rest of the world.

An editorial in the state-run Glo bal Times on Monday suggested that dissenting voices within and advising the Chinese government were pushing for renegotiation of the phase one deal, a suggestion that was swiftly shot down by Trump at a press conference in Washington on Monday.

Among the other US goods to be offered exemptions from trade war tariffs are recombinant human insulin, halogen light bulbs for trains, ships and aircraft, electricity generators, flight data recorders, certain digital cameras, and gold ore.

Top negotiators including China’s Vice-Premier Liu He and US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer held a telephone call on Friday, the first since the deal was signed in January.

A Chinese statement carried by state media said they would “create favourable conditions to implement the phase one trade deal”, at a time when superpower tensions have been running high over the handling of the coronavirus pandemic.

In a statement posted to its website last week, the Office of the US Trade Representative added that “both sides agreed that good progress is being made on creating the governmental infrastructures necessary to make the agreement a success.”

Chinese analysts on Tuesday downplayed the prospect of a collapse in the trade deal, which has only been in effect since February 15, and which took more than a year to negotiate.

Chen Fengying, a senior researcher with the China Institute of Contemporary International Relations, said that despite the rhetoric, there is no immediate threat to the deal, However, she did suggest that there should be room to discuss the purchase clause in light of the coronavirus disruption.

“It is not a normal time for either country. China is still keen on buying American commodities such as pork and soybeans, but the question is whether the US can produce enough and it deliver to China amid the coronavirus pandemic,” she said. “The massive purchase is the hardest element [of the deal] to fulfil, accordingly fuelling calls for renegotiation.”

He Weiwen, a former senior official at the Chinese consulates in New York and San Francisco, now a senior fellow at the Centre for China and Globalisation, a government-linked think tank, suggested that there was a feeling within China that the deal was not reciprocal.

“The deal was negotiated under US tariff hikes and Section 301 investigations. China promised a lot of changes, but the US made few concessions on tariff rollbacks,” he said.

As part of the phase one deal, the US agreed to slash tariffs from 15 to 7.5 per cent on US$120 billion worth of Chinese goods. The Trump administration has since refused to cut other tariffs, despite the efforts of free trade lobbyists in Washington.


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