The tariff news out of China on Monday was good.
In keeping with a commitment to “facilitate the open economy to a new level” (to quote a flowery statement from the Finance ministry), Beijing released a list of 859 items that will get lower import levies in 2020.
We talked a bit about this first thing Monday morning in Asia. Subsequent details suggest the preferential tariffs for 2020 will cover items that, in 2018, accounted for nearly $400 billion in imports, roughly a fifth of the total. You’re reminded that import growth had slumped in China in 2019. Indeed, before last month’s meager rise, imports had contracted for six consecutive months.
Clearly, lower tariffs should help and will hopefully assist in shoring up domestic demand, which is sagging amid persistent jitters about the myriad headwinds facing the world’s second largest economy.
Below is a visual that gives you an idea of how the retaliatory levies in place due to the trade war with Donald Trump are now set to leave the US hopelessly hamstrung:
As you can see, until the trade war abates in earnest, US products aren’t competitive, especially amid new tariff reductions. It would appear that in addition to underscoring Beijing’s ongoing efforts to open the economy, the cuts for 2020 will also serve a dual purpose by incentivizing the US to compromise, lest American imports should become increasingly disadvantaged.
“The list allows lower tariffs on goods coming from World Trade Organization members”, Bloomberg notes, adding that “for countries with which China has free-trade agreements, duties can be lower still”. Those countries include New Zealand, Peru, Costa Rica, Switzerland, Iceland, Singapore, Australia, South Korea, Georgia, Chile and Pakistan.
The list includes frozen pork, an effort to help ease the surge in consumer prices tied to shortages.
With the country’s pig herd having been cut in half, China imported some 230,000 tonnes of pork in November. That’s a 150% increase YoY.
Pork imports for January through November are roughly 1.7 million tonnes, up 58%.