As the trade war escalates, China made a surprising announcement on Sunday that it will reduce tariffs on a long list of items, including steel.
Reuters reported that the country will cut tariffs to 8.4% from 11.5% beginning on November 1.
From Reuters:
Import tariffs on wood and paper products, minerals and gemstones will be cut to 5.4 percent from 6.6 percent, the ministry also said in its statement.Average import tariffs on over fifteen hundred products will be lowered to 7.8 percent from 10.5 percent, the ministry said.“Reducing tariffs is conducive to promoting the balanced development of foreign trade and promoting a higher level of opening up to the outside world,” the ministry said .China’s cabinet has announced plans to cut tariffs on machinery, electrical equipment and textile products beginning on Nov. 1, as the country braces for an escalating trade war with the United States.The overall tariff level will be reduced to 7.5 percent in 2018 from 9.8 percent in 2017 as a result, the cabinet has said.
This is not the first time China has cut tariffs. In May, the country “made a majority of imported medicines tariff-free.” Two months later, it “reduced import tariffs on a range of consumer items including cars, apparel, cosmetics, home appliances, and fitness products.”
China without a doubt exports more than it imports. In August, reports came out that China’s exports went up 12.2% “in July in dollar terms from a year earlier.” Experts predicted 10%. Imports went up 27.3% and left China with a trade surplus of $28 billion.
Yet reports on Sunday show signs of slowing manufacturing in China. From The Wall Street Journal:
An intensifying trade brawl with the U.S. is starting to take a heavier toll on China’s economy, as weakening foreign demand and sluggish domestic consumption cause Chinese manufacturers to significantly scale back production.The manufacturing slowdown, detailed in reports released Sunday, raises the prospect that China’s leaders will step up economic stimulus measures to prop up growth.The new data showed that privately owned makers of cars, machinery and other products stopped expanding in September, as export orders dropped the most in more than two years. At the same time, output by large, state-owned manufacturers continued to weaken.
We do not know yet if these moves will change President Donald Trump’s mind on tariffs. Fortune reported that JPMorgan Chase expects Trump will tariff everything:
“JPMorgan has adopted a new baseline that assumes a U.S.-China endgame involving 25% U.S. tariffs on all Chinese goods in 2019,” JPMorgan strategists including John Normand wrote in a note Friday. While growth forecasts for both the U.S. and China aren’t much affected, thanks in part to Chinese stimulus measures, “a weaker yuan becomes part of the new equilibrium,” they wrote.The People’s Bank of China will probably pursue a looser monetary policy to shore up growth in face of the threats to trade, and likely won’t intervene much to counter resultant downward pressure on the yuan, according to the JPMorgan analysis.
China responded last month to the U.S. raising tariffs by placing tariffs on $60 million worth of American goods.
CLICK HERE FOR FULL VERSION OF THIS STORY