In a potential sign of easing trade tensions and acknowledging the economic repercussions of the ongoing trade war, China has reportedly begun exempting certain U.S. imports from its significant 125% tariffs, reports Reuters.
Positive Impact
Beijing’s reported consideration of tariff exemptions, which business groups are hoping will extend across numerous industries, had a slight positive impact on the U.S. dollar and boosted equity markets in Hong Kong and Japan.
Alfredo Montufar-Helu, a senior advisor at the Conference Board’s China Center, suggested that such exemptions could serve as a “quid-pro-quo move” and potentially help de-escalate the ongoing trade tensions. However, he also cautioned that “it’s clear that neither the U.S. nor China want to be the first in reaching out for a deal.”
As of yet, China has not made any public announcements regarding these potential exemptions.
U.S. President Donald Trump stated in an interview with TIME magazine that discussions on tariffs between the U.S. and China were ongoing and that Chinese President Xi Jinping had contacted him. However, Beijing has disputed the U.S.’s account of these talks. Equity markets largely did not react significantly to the interview. European shares maintained positive territory, while U.S. stock futures were unable to sustain early gains and ended the day with little change.
A statement released on Friday by the Politburo, the Communist Party’s top decision-making body, emphasized domestic stability efforts by supporting companies and workers most affected by the tariffs. This readout, following the Politburo’s regular monthly meeting, indicated that Beijing was also prepared to endure a prolonged trade war if necessary to outlast Washington in weathering the economic pain.
According to a source familiar with the matter, a taskforce within the Ministry of Commerce is currently compiling lists of items that could be exempted from tariffs and is inviting companies to submit their own exemption requests.
Pharma Exemption
According to Hart, some member pharmaceutical companies have reported successfully importing drugs to China without incurring tariffs. He suggested that these exemptions were likely specific to certain drugs rather than being applied across the entire pharmaceutical industry.
A source within a memory chip design firm indicated that the China Semiconductor Industry Association (CSIA) had informed them earlier in the week about waivers on imports of eight specific types of microchips. This source, who requested anonymity due to the sensitive nature of the information, told Reuters that analogue chips were included in the exemptions, but memory chips were not. This exclusion would likely affect Micron Technology, the largest U.S. producer of memory chips. When contacted for comment, the CSIA stated that it was a matter for customs, while Micron did not immediately respond to a request for comment. The source added that the impact of China’s tariffs on U.S.-made chips had been more significant than initially anticipated, prompting these adjustments.
The tariff exemptions being considered by Beijing could provide cost relief for companies operating in China and potentially ease pressure on U.S. exports, particularly at a time when the Trump administration has shown indications of a desire to reach a trade agreement with Beijing.
The European Union Chamber of Commerce in China also stated that it had raised the issue of tariff exemptions with the Chinese commerce ministry and was currently awaiting a response.
On Friday, a list circulating on Chinese social media platforms and among some businesses and trade groups identified 131 categories of products reportedly under consideration for tariff exemptions. Reuters was unable to independently verify this list, which included a wide range of items, from vaccines and chemicals to jet engines, as well as the aforementioned eight types of chips.
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Source: Reuters
