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U.S. to Delay Tariff Hike During Trade Talks with Mainland China

President Trump has agreed to delay a tariff increase on US$200 billion worth of imports from mainland China while the two sides conduct negotiations on long-standing trade irritants. In addition, Beijing has agreed to increase purchases from the United States in an effort to reduce its bi-lateral trade surplus.

An increase in the Section 301 additional tariff imposed on mainland Chinese goods from 10 percent to 25 percent had been scheduled to take effect on 1 January 2019. However, a White House statement said this increase will not take effect “at this time” and that the two countries “have agreed to immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture.” The negotiations will be led on the U.S. side by U.S. Trade Representative Robert Lighthizer.

The statement indicates that both sides “will endeavor to have this transaction completed within 90 days.” If no agreement is reached within that time, the 10 percent additional tariff will be increased to 25 percent (although the statement does not say whether such an increase would be immediate). Larry Kudlow, President Trump’s chief economic adviser, initially indicated that the 90-day truce would begin on 1 January 2019 but the White House subsequently said the 90-day clock began ticking on 1 December 2018.

While a Xinhua article cited mainland Chinese Foreign Minister Wang Yi as saying the United States and mainland China “also agreed to step up negotiations toward the elimination of all additional tariffs” (presumably those affecting US$250 billion in U.S. imports from mainland China as well as more than US$100 billion in mainland Chinese imports from the United States), the White House had offered no confirmation.

In addition, the White House statement said, mainland China has agreed to purchase an as-yet-unspecified “but very substantial” amount of agricultural, energy, industrial and other products from the United States to reduce the trade imbalance between the two countries. Agricultural purchases are set to begin immediately, which should benefit U.S. farmers that have seen export shipments decline in recent months amid trade tensions with mainland China and other major trading partners.

Content provided by Picture: HKTDC Research
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