China trade

China Is Processing Tariff Waiver Applications. Hopefully, That’s Good News

The signaling effect is ostensibly positive.

It may not sound like it, but news that China is processing applications for waivers on retaliatory tariffs imposed on US pork and soy is a big deal.

Earlier this week, we noted that Chinese buyers had likely exhausted their capacity to purchase US agricultural products under existing waivers granted over the summer. That presents a hurdle for the “Phase One” trade deal, which Donald Trump has variously insisted will include a commitment from China to purchase “massive” amounts of US farm products, where “massive” means between $40 billion and $50 billion per year.

That simply isn’t possible under the waivers regime, and it probably isn’t possible at all. But in order for China even to bring purchases of US agricultural goods back to pre-trade war levels, Trump needs to roll back some of the tariffs, so that China can remove some of its retaliatory measures, thereby obviating the need for the cumbersome waivers.

Read more: As Trade Talks Hang By A Thread, A Soybean Problem Emerges

In the meantime, the White House continues to tout the resumption of Chinese buying, and any indication that the renewed purchases are set to taper off could be a stumbling block.

That’s why it’s good news that China is processing more waiver requests.

According to domestic needs, Chinese enterprises independently import certain quantities of goods from the United States through market-based procurement. The Customs Tariff Commission of the State Council is carrying out the exclusion of some soybeans, pork and other commodities based on the application of relevant enterprises”, the Finance ministry said, in a Friday statement.

It’s somewhat vague, but the signaling effect is welcome, especially following Thursday afternoon’s reports that the two sides are still having problems coming to terms on the farm product buying.

As Bloomberg details, “the waivers allow buyers to import US soybeans without paying the 30% retaliatory tariffs [but] some traders had difficulty clearing customs as they were required to pay a deposit in lieu of the levy before they could apply to the finance ministry for an exemption”.

That’s obviously sub-optimal, as it assumes the buyers have the cash to put up, an assumption that, not surprisingly, turned out to be mistaken.

Eventually, Chinese customs officials started letting importers post bank guarantees instead, but you get the point: Either more waivers get extended (i.e., quotas are raised), tariffs get rolled back or else the buying grinds to a halt again.

Hopefully, Friday’s somewhat nebulous statement from the Finance ministry is indicative of underlying progress on higher quotas or, ideally, progress on a mutual agreement between Washington and Beijing to lift some levies.


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