China on Wednesday said it will exempt a list of US goods from 25% additional tariffs put in place last summer in retaliation to the initial escalatory stages of Donald Trump’s trade war.
The announcement, courtesy of the Ministry of Finance’s website, is perhaps more notable for what isn’t exempt than for what is.
Left off the reprieve list are US farm goods, including soybeans and pork. In other words, China is not prepared to give up the political leverage Beijing obtained by taxing agricultural products to the detriment of Trump’s base.
Items exempt include anti-cancer drugs, lubricant oil, whey and fish meal (the latter two are animal feed ingredients).
The list covers 16 categories of products and is effective for three years from September 17. Back in May, China indicated it would establish the exemption program as people began to fret about the mounting costs of the seemingly intractable dispute on the domestic economy which, of course, grew at the slowest pace in 27 years in the second quarter.
Today’s move is likely to be seen as an incremental goodwill gesture amid working-level meetings ahead of principal-level talks planned for next month between Bob Lighthizer, Steve Mnuchin and Liu He. On Tuesday, SCMP reported that the two sides are revisiting the text of the draft truce from April which was set to serve as the basis for a deal before things fell apart at the beginning of May.
Sources also say China may be willing to make “modest” farm purchases in order to foster trust and convince Trump to delay a planned tariff hike on $250 billion in goods.
Trump is said to be prepping a crackdown on shipments of illicit fentanyl via an executive order some time in the next couple of months. The move is aimed at China, although the action won’t be limited to Beijing. That could set in motion more tit-for-tat escalations.
China on Wednesday said it will announce more exemptions over time. Beijing began accepting requests for the second round of waivers earlier this month. The application window for the second tranche of waivers will close midway through October.
Meanwhile, Global Times editor Hu Xijin suggested in a tweet that China is on the verge of announcing new measures to cushion the blow from the trade war. “Based on what I know, China will introduce important measures to ease the negative impact”, he said. “The measures will benefit some companies from both China and the US”.
Later, Hu responded to Trump, who weighed in on the tariff exemptions first thing Wednesday morning.
Trump, apparently psuedo-quoting CNBC (the president tagged the network’s Joe Kernen), mockingly celebrated the planned exemptions. To wit:
China suspends Tariffs on some US products. Being hit very hard, supply chains breaking up as many companies move, or look to move, to other countries. Much more expensive to China than originally thought.
Hu chuckled. “Odd and hilarious analysis. His understanding of the Chinese economy is obviously based on hearsay”, Xi’s media man mused, adding that “the great president of the US can recognize the superficiality of this kind of analysis, and the American mainstream society won’t be misled by it”.
Don’t be so sure about that, Hu. Americans are a gullible bunch. That’s why the US has this “great president” in the first place.