China and the U.S. will simultaneously relax tariffs later this month as trade tension eases between the world’s largest economies.
CHINESE OFFICIALS ON Thursday announced plans to halve tariffs on roughly $75 billion of U.S. goods – a move that is expected to further normalize trade relations between the world’s two largest economies.
In announcing the tariff reductions, which will take effect on Feb. 14, China’s Ministry of Finance said in a statement that the adjustment is a response to American plans announced last month to reduce some tariffs on Chinese products. The lower U.S. tariffs will also be implemented on Valentine’s Day.
After more than a year of trade tension and the exchange of tit-for-tat tariffs, the U.S. and China are preparing for their phase one trade agreement to take effect later this month. As part of the deal, China has committed to buying tens of billions of dollars of American exports in the next two years – an arrangement that the White House hopes will strengthen an American agriculture sector decimated by last year’s trade war.
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President Donald Trump championed the trade victory during his State of the Union address on Tuesday night, alleging that China has “for decades … taken advantage of the United States” and that the accord negotiated by his administration would effectively right the ship.
But questions have been raised as to whether China will be able to meet its end of the bargain in the midst of an economically crippling coronavirus outbreak. National Economic Council Director Larry Kudlow acknowledged on Fox Business earlier this week that any hypothetical “export boom” the U.S. would enjoy from the trade agreement would “take longer because of the Chinese virus.”
And rumors surfaced earlier this week that Chinese officials were discussing whether to take advantage of provisions included in the trade deal that would grant them leeway in the event of “a natural disaster or other unforeseeable event.”
“The intensifying coronavirus outbreak constitutes a large negative economic shock to China that will ripple through the global economy,” Kathy Bostjancic, director of U.S. macro investor services at Oxford Economics, wrote in a research note on Wednesday. “Additionally, due to disruptions from the coronavirus, China is reportedly considering asking for flexibility from the U.S. administration regarding its promise of higher imports of agricultural, manufactured, energy, and services contained in the phase one trade deal.”
Trade data published on Wednesday by the Bureau of Economic Analysis indicated U.S. exports to China fell and imports from China plummeted in 2019, and analysts had hoped the signing of a phase one trade agreement last month would turn a corner on U.S.-China trade volatility.
But the first quarter of 2020 is expected to be a rough one for Chinese import and export totals – and economic activity, generally. Kudlow’s comments suggest the Trump administration is at least anticipating some degree of trade disruption.[
Many experts’ projections predict economic activity will rebound sharply in April, May and June. But with more than 500 dead and more than 28,000 infected in China, an economic turnaround that would maximize the terms of the U.S.-China phase one agreement still feels a ways off.