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Economy

U.S. Considers Rolling Back Tariffs On Chinese Goods Ahead Of Trade Deal

Isabel Togoh
U.S. Considers Rolling Back Tariffs On Chinese Goods Ahead Of Trade Deal

Topline: The Trump administration could roll back billions in dollars of tariffs imposed on Chinese goods in September in a bid to smooth the way for a possible deal that could end the trade war between the world’s largest economies as early as next month, according to reports.

  • A long-awaited ‘phase one’ trade deal between the U.S. and China is expected to be signed this month, winding down months of an escalating trade war between the two countries that has threatened to tip the global economies into a recession.
  • As part of that deal, the U.S. is expected to pledge to cut back on tariffs on $112 billion worth of Chinese goods that were imposed in September, according to a U.S. official cited by Reuters.
  • China also pushed for the rollback of tariffs on $156 billion worth of Chinese imports would take effect from December on items including clothes and flat-screen televisions.
  • According to the Financial Times, citing five people familiar with the discussions, the U.S. is considering reversing the 15% tariffs that were activated on September 1.
  • Such a move is already music to investors’ ears as global markets rallied—the FTSE climbed 19 points, while in Asia, Japan’s Nikkei gained 2% and Hong Kong’s Hang Seng Index gained 0.5%.
  • In return, China will be expected to purchase more agricultural products from U.S. farmers while promising better protection for intellectual property, The Guardian reports. A dispute over IP theft triggered the trade war in the first place.

What to watch for: The phase one trade deal is “very close to finished,” according to a source cited by Reuters, while President Donald Trump last week said a deal was imminent. But there are concerns among lawmakers and analysts that the deal will be short-term and will fail to address key issues, including Beijing’s subsidies for state-owned companies. Trump and Chinese President Xi Jinping had been tipped to sign a deal at the Asia-Pacific Economic Cooperation in mid-November but the summit host Chile canceled the international meeting due to anti-government protests.

Key background: For more than 15 months, the U.S. and China have locked horns in a damaging trade war that has seen both sides impose retaliatory tariffs on billions of dollars worth of goods. The measures have harmed China’s economy and U.S. businesses, while the fallout from the dispute has weighed on the global economy. The timing of a deal—one year away from the U.S. election—and the possible economic headwinds could prove a boost to Trump’s 2020 re-election campaign.

Tangent: Speaking at an import fair in China, President Xi once again called on global leaders to fight against protectionism as he urged them to pursue “tearing down walls” instead of “putting up walls.” French President Emmanuel Macron, also at the fair, called for an end to the U.S.-China trade war.

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