US delays retaliatory tariffs in response to China’s gesture

The US and China have stepped up goodwill gestures by postponing retaliatory tariff-related actions ahead of their crucial 13th round of trade talks in Washington next month. But, the temporary reprieve is unlikely to resolve the differences on major structural issues, analysts said.

On Wednesday, China announced it is dropping additional tariffs of 25% imposed on 16 items of imports from the US last year.

Although the 16 products do not include major US agricultural products like soybean that are causing an uproar among American farmers, President Donald Trump repeatedly termed Beijing’s decision as a “big move”.

“I think they (the Chinese) did the right thing ... I think it was good for them,” Trump said, insisting that the US would reciprocate the “goodwill gesture”, according to a report in the Washington Trade Daily.

The 16 items on which China dropped retaliatory tariffs with effect from 17 September are divided into two lists. Products on the first list, including shrimp and prawn seedlings, and some pharmaceutical products, will be eligible for refunds for tariffs already paid. The items on the second list include whey for feed, release agents, isoparaffin solvent, and lubricating base oil.

In response to the Chinese announcement, the US president claimed that Beijing is ready to strike a deal because “the US tariffs imposed on Chinese products have caused real harm to the Chinese economy”.

“China wants to make a deal. We will see what happens. We have to make the right deal for this country,” he maintained.

Trump tweeted on Wednesday that the US will delay a scheduled tariff increase on roughly $250 billion of Chinese goods on 1 October. He described his decision as a “goodwill gesture” made at the request of Chinese vice premier Liu He, as 1 October marks the 70th anniversary of the founding of the People’s Republic of China.

The US move will delay scheduled tariff increase from 25% to 30% of non-consumer items from China that are used by American businesses as inputs.

Washington imposed new tariffs on about $112 billion Chinese products from 1 September, and another round of tariffs on Chinese electronic and consumer items is expected to come into effect from 15 December. China retaliated by imposing tariffs on politically sensitive US farm produce and other goods amounting to $70 billion.

In an angry response to the Chinese retaliatory tariffs, the US president made it known that he would further raise the tariffs while ordering American companies to stop trading with China and move their production facilities to other countries. Trump announced on Twitter that he will raise tariffs on $250 billion of Chinese goods, up from 25%, with effect from 1 October.

The US trade and industry lobbies severely criticized Trump’s actions. “Since the business backlash following the tweet, the Trump administration has sought to de-escalate the trade war,” The Wall Street Journal reported.

Nevertheless, the so-called goodwill gestures are unlikely to bring about a lasting and credible trade deal between the two sides who seem to be sharply divided on various issues. “The negotiators have had a year to come to an agreement, and they remain structurally at odds on key issues,” said Andrew Polk, co-founder of research firm Trivium China in Beijing, according to a report in Bloomberg on 12 September.

“The US decision to postpone extra tariffs is good for the upcoming China-US trade talks, but what US President Donald Trump has done is far from enough and we should not consider it a breakthrough in trade talks, as they remain very tough,” experts told the Chinese newspaper Global Times on Thursday.