US and China Temporarily De-Escalate Trade War

Strategic Insights -

The US and China have agreed to slash tariffs on each other's goods for 90 days, marking a temporary de-escalation in their brutal trade war that has roiled global markets and international supply chains. The deal, made possible by pivotal talks in Geneva over the weekend, sees the US reduce tariffs on Chinese goods to 30% while China will lower its tariffs to 10%. This drastic reduction in tariffs, coupled with the suspension of certain non-tariff countermeasures by China, has brought some relief to markets that have been battered by the trade war.

Key Takeaways:

  • The US and China have agreed to reduce tariffs on each other's goods for 90 days, with the US reducing its tariffs from up to 145% to 30% and China lowering its tariffs from over 100% to 10%.
  • The reductions came into effect just after midnight Washington time (0401 GMT) on Wednesday, marking a major de-escalation in trade tensions.
  • Washington also lowered duties on low-value imports from China, with small parcels being hit by duties of 54% of their value down from 120%.
  • China has suspended certain non-tariff countermeasures, halting the addition of 28 US entities to an "export control list" and 17 US entities to an "unreliable entity list" for 90 days.
  • Companies on the lists are prohibited from receiving items that could be used for both civilian and military purposes or making new investments in China.
  • Analysts warn that the possibility of tariffs returning after 90 days piles on more uncertainty and that further tariff reductions will be difficult.

Statistics:

  • Tariffs on Chinese imports: US tariffs soared to up to 145% and as high as 245% on some products (pre-deal).
  • US duties on low-value imports from China: reduced from 120% to 54%.
  • Duration of suspended non-tariff countermeasures: 90 days.
  • Number of US entities added to an "export control list": 28.
  • Number of US entities added to an "unreliable entity list": 17.
  • Percentage of investors in China's economy affected by trade uncertainty: unclear, but acknowledged by Beijing officials.

Sources:

  • AFP: "US and China slash tariffs in 90-day deal to ease trade tensions".
  • The Economist Intelligence Unit, http://www.eiu.com.