China to exempt 16 categories of US products from tariffs

Marco Green
September 11, 2019

It adds to indications that both sides might be settling in for extended conflict even as they prepare for talks in Washington aimed at ending the dispute that threatens global economic growth.

The lists mark the first time Beijing has announced products to be excluded from tariffs. An exemption list of just 16 items will not change China's stance.

The American Chamber of Commerce in Shanghai said just 47 percent said they expected to increase their investments in China in 2019 - down from 62 percent previous year - while three-quarters of businesses surveyed said they opposed the United States use of punitive tariffs to force China into a trade deal. But there has been no sign of progress.

"Our house view is that the two countries are unlikely to reach a deal this year".

Beijing has said it would work on exempting some US products from tariffs if they are not easily substituted from elsewhere.

Chinese leaders are resisting US pressure to roll back plans for government-led creation of global competitors in robotics and other industries. That will be applied to the products subject to additional tariffs on US$60 billion of American goods. That has battered farmers and manufacturers on both sides and fueled fears a global economy that was showing signs of a slowdown might tip into recession.

The South China Morning Post reported, citing an unidentified source, that China was expected to buy more agricultural products in hopes of a better trade deal with the United States. Tariffs of 25% imposed previously on $250 billion of Chinese goods are to rise to 30% October 1.

Analysts have noted that with duties on soybeans and other key imports such as U.S. -made cars, China is taking aim at a key political support base of U.S. President Donald Trump, mainly the factories and farms across the Midwest and South at a time of receding momentum in the world's top economy.

"These adjustments signal that China is more willing to make progress in the October trade talks, likely toward striking a "narrow" agreement that involves China buying more United States goods in exchange for the U.S. suspending further tariff hikes", Barclays analysts said in a research note. Both sides raised tariffs on each others' goods on September 1 in the trade war's latest escalation, and the US plans to add more tariffs on October 1. Beijing responded by imposing duties of 10% and 5% on a range of American imports.

Products covered by Wednesday's exemptions include lubricants, insecticides and whey and fish meal for animal feed.

Chinese imports of USA goods tumbled 22.5% in August from a year earlier and exports to the United States, China's biggest foreign market, fell 16%.

Talks broke down in May over how to enforce any agreement.

Beijing and Washington were close to a deal last spring but USA officials said China backed away from an agreed text over a reluctance to change laws to address US complaints.

Other reports by Click Lancashire

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