China is set to reduce its tariff rates on $75 billion in U.S. imports by half as part of its effort to implement its side of the phase 1 trade deal it recently signed with the U.S.
China’s Ministry of Finance announced by Feb. 14, China would reduce its tariff rate on the selected U.S. imports from 10% to 5%, while other tariffs will fall from 5% to 2.5%, the Wall Street Journal reported on Thursday.
China implemented the tariffs in September and December amid trade disputes between the U.S. and China prior to a deal.
China’s latest decision to reduce tariffs reportedly comes amid some doubts about the country’s ability to implement the phase 1 deal, which the two countries signed into effect on Jan. 15. As part of the deal, China has indicated it would raise its purchase of U.S. goods by $200 billion over the next two years.
The recent coronavirus outbreak in Wuhan has also reportedly interrupted China’s economic activity, as several cities in the Hubei province have been placed on lockdown in a move affecting some 56 million people.
In a statement, China’s Ministry of Finance indicated it was working towards meeting its obligations in the new deal. The ministry said it intended to “alleviate economic and trade frictions and expand economic and trade cooperation” with the U.S.
“We hope to work with the United States towards the ultimate elimination of all increased tariffs,” the Finance Ministry said.
China’s commitment to take on new U.S. imports will reportedly comprise one of the biggest components of the new trade deal.
China’s two-year plan to receive an additional $200 billion in U.S. products will be split between 2020 and 2021. The first year will reportedly include $77 billion in new U.S. imports to China, while the second year will see the remaining $123 billion in U.S. imports.
To enable such an increase in products to China, the U.S. would have to export a total of $263 billion in 2020 and $309 billion in 2021; a figure the Wall Street Journal reports is without precedent in U.S. trade history.
For its part in the deal, the U.S. has agreed to cut tariffs on $120 billion in Chinese imports by half. The effective tariff rate would drop from 15% to 7.5% within about a month of the deal’s signing. The U.S. has also agreed to forego other tariffs it had planned to impose on Chinese goods.
As he signed the phase 1 deal in January, President Donald Trump indicated a second phase of trade with China would be contingent on the success of the first half of the deal. Trump indicated the second phase would likely feature the elimination of tariffs entirely.
“We’re leaving tariffs on,” Trump said when he signed the deal, “. . . but I will agree to take those tariffs off if we are able to do phase two.”