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In a recent development, China announced exemptions for certain U.S. imports from its significant 125% tariffs, although Beijing quickly dismissed U.S. President Donald Trump’s claim that negotiations between the two nations were in progress.
The Trump administration has indicated a desire to alleviate tensions between the world’s two largest economies, amid growing concerns that escalating trade measures could lead to a global recession.
“This move could potentially serve as a means to de-escalate ongoing tensions,” noted Alfredo Montufar-Helu, a senior advisor at the Conference Board’s China Center. However, he cautioned that neither nation appears willing to make the first overture towards an agreement.
Trump mentioned to reporters that he had conferred with Chinese President Xi Jinping “numerous times,” but he did not specify when their last discussion took place or the subjects explored.
This declaration followed Trump’s assertion in an interview with Time magazine that Xi had reached out to him.
“He’s called. And I don’t think that’s a sign of weakness on his part,” Trump stated in the interview.
The Chinese government continued to refute the U.S. narrative regarding the talks; the Chinese embassy reiterated that no discussions had occurred, urging the U.S. to “stop creating confusion.” Moreover, China has not publicly acknowledged any tariff exemptions.
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As the U.S.-China trade war intensifies, both parties remain steadfast in their positions. Andrew Chang reports on China’s potential strategies to weather U.S. tariffs and the implications of this global economic strain on international relations.
A recent statement from the Politburo, which functions as the Communist Party’s leading decision-making entity, underscored a commitment to fortify domestic stability by providing support to firms and employees adversely impacted by the tariffs.
The Politburo’s summary following its latest monthly meeting revealed Beijing’s readiness to engage in a prolonged trade conflict if necessary, demonstrating a willingness to endure the economic hardships that may follow.
A task force within the Ministry of Commerce has been gathering a list of products that might be exempt from tariffs and is soliciting input from businesses. Sources indicate that the ministry engaged with over 80 foreign companies and business organizations in China to assess the ramifications of U.S. tariffs on investments and operations.
“The Chinese government, for instance, has been inquiring with our firms about the specific U.S. imports that are irreplaceable and could disrupt supply chains,” remarked Michael Hart, president of the American Chamber of Commerce in China.
Hart further noted that some pharmaceutical companies among member firms have reported successful tariff-free imports of certain drugs into China, suggesting these exemptions may be specific to individual medications rather than applicable to the broader sector.
The CEO of French aerospace engine manufacturer Safran disclosed that they received notification of tariff exemptions on “a specified number of aerospace equipment parts,” notably including engines and landing gear.
Considering the tariff exemptions proposed by China could alleviate financial pressures for local companies while simultaneously reducing stress on U.S. exports, it comes at a time when the Trump administration is signaling interest in striking a deal with Beijing.
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China’s response to the ongoing trade war involves not only a hefty 34% retaliatory tariff on American imports but also limitations on essential rare-earth minerals. In retaliation, Trump has threatened to impose an additional 50% tariff if China does not relent on its measures, highlighting the escalating tension between the world’s two largest economies and the potential repercussions of China’s defensive strategies.
A circulating list of 131 product categories under consideration for tariff exemptions has emerged within Chinese social media and among business groups. While Reuters has not verified this list, it reportedly includes various categories ranging from vaccines and chemicals to aircraft engines.
Huatai Securities has indicated that these categories correspond to approximately $45 billion in imports to China from the previous year.
Requests for comments from China’s customs agency and the Ministry of Commerce went unanswered. Meanwhile, the Foreign Ministry asserted it was unaware of any plans concerning tariff exemptions and redirected questions to “relevant authorities.”
Enduring Conflict
While the U.S. has described the trade standoff as economically unsustainable and has already offered exemptions for select electronic products, China remains firm in its resolve to continue the confrontation until the U.S. retracts its 145% tariffs.
China’s economy entered the trade war with prevalent unemployment issues, deflationary trends, and growing concerns over a backlog of unsold exports that could further depress domestic prices.
Despite boasting a trillion-dollar trade surplus in 2024, China is heavily reliant on U.S. imports for critical materials such as ethane, which is essential for plastic manufacturing and pharmaceuticals.
Major pharmaceutical firms like AstraZeneca and GSK have established manufacturing facilities in the U.S. specifically for the drugs slated for the Chinese market, according to data from the Chinese government.
Notably, significant ethane processors have actively sought tariff waivers from Beijing due to the lack of alternative suppliers.
Trump’s Optimism for Trade Agreements
Trump recently expressed optimism about nearing a trade agreement with Japan, which analysts view as a potential “test case” for future bilateral trade arrangements. Anticipation grows for a potential announcement during the upcoming G7 summit in Canada with Prime Minister Shigeru Ishiba.
Separately, Trump told Time magazine he had concluded “200 deals” expected to be finalized in the next three to four weeks, although further details were not provided. He framed a scenario where sustaining tariffs at 20% to 50% within a year would constitute a “total victory.”
The U.S. Trade Representative’s office reported a successful meeting with South Korea, further suggesting productive negotiations may be underway.
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