Well, China is going to go ahead an cut the average tariff rate on most of its trading partners, in a bid to boost imports and ensure consumer prices don’t rise amid the trade war with the U.S.
He didn’t elaborate, but Premier Li Keqiang reiterated China’s commitment to opening up its economy and the apparently broad-based tariff cuts will come as soon as next month, according to the ubiquitous “people familiar with the matter”.
The country’s MFN average tariff rate currently sits at 9.8%. In December, China cut import taxes on consumer goods and followed up on that in April with the announcement of new measures aimed at opening up the financial sector. Similar cuts to consumer good taxes were announced in May and implemented in July.
Again, this comes just as Beijing is set to slap differentiated duties on $60 billion in U.S. goods starting next week in retaliation for Trump’s decision to move ahead with tariffs on another $200 billion in Chinese imports.
Li also tipped tax cuts and a simplified individual income tax regime. He cited tax revenue that’s risen faster than economic growth over the past year.
Li’s comments came at the World Economic Forum in Tianjin.
On Tuesday, Li promised China wouldn’t weaponize the yuan (too late!) in the increasingly contentious trade spat with the U.S.
Wednesday’s pledge to lower tariffs on the majority of the country’s trading partners certainly looks like a move designed to make Beijing look like the rational actor and thereby paint the Trump administration as the antagonist that it most assuredly is.
In other words, China is trying to manage the optics while simultaneously reassuring the Chinese people that Beijing will not allow the trade spat with the U.S. to result in a severe economic downturn or otherwise undercut the domestic economy.
Bloomberg economist Chang Shu calls the move “clever”.