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China cuts tariffs on US$75 billion despite the virus closing borders

CHINA plans to lower tariffs on US$75 billion worth of American-made goods, in a move widely-seen to be keeping up its end of a trade pact with the United States

China cuts tariffs on US$75 billion despite the virus closing borders

CHINA plans to lower tariffs on US$75 billion worth of American-made goods, in a move widely-seen to be keeping up its end of a trade pact with the United States

18 February 2020 - 19:00

CHINA plans to lower tariffs on US$75 billion worth of American-made goods, in a move widely-seen to be keeping up its end of a trade pact with the United States.

That truce most likely will not last long, however, if China does not carry through with the part of the deal President Donald Trump prizes most: a promise to buy $200 billion in goods from the US over the next two years.



In a research note, Fitch Ratings said the country's economic growth in the January-to-March period could fall by half from a year ago, to three per cent, if the epidemic is not contained before spring.



This comes after the two sides reached an interim trade agreement intended to forestall more tariff hikes. The deal represented a freeze on the trade war rather than an end, and the countries have pledged to continue talks, New York Times reported.



The United States agreed to reduce tariffs on $120 billion worth of Chinese-made goods as part of that deal. China's Ministry of Finance said it would essentially halve tariffs it placed in September on American cars, crude oil, soybeans and other goods.



Chinese officials said they still hoped to eventually eliminate tariffs enacted by both sides. The trade truce left in place most of the new and increased tariffs on $360 billion in Chinese-made goods that Mr Trump began enacting in 2018.



'The next step of the adjustment depends mainly on the development and changes of the Sino-US economic and trade situation,' the Finance Ministry said. 'We hope to work with the United States toward the ultimate elimination of all imposed tariffs.'



Before that next step can happen, China may need to prove to the United States that it plans to buy that $200 billion in goods that it promised in January. That could be difficult for Beijing as it grapples with controlling the spread of the coronavirus, putting major portions of the country on lockdown with factories and companies across the country temporarily closed, and major airlines cancelling flights to China.



The price of oil has fallen in anticipation of lower Chinese demand. China has signalled that it would allow firms to claim force majeure - essentially, recognition that a company cannot meet its obligations because of circumstances beyond its control ?for reasons related to the outbreak.



Still, the coronavirus gives China new reasons to hold up its end of the bargain. The trade pact commits China to buying $32 billion in American agricultural products over two years. That food could come in handy: Chinese officials have rushed to ensure adequate food supplies and keep grocery bills low despite the containment efforts.


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