China fulfills trade commitment with tariff cuts on $75b of US goods despite virus outbreak
Published: Feb 06, 2020 03:58 PM

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China announced Thursday that it would cut tariffs by half on $75 billion worth of US products in a response to Washington's decision to halve duties on Chinese goods, highlighting Beijing's willingness to fulfill commitment made in the phase one trade talks even as it faces tremendous challenges due to a fast-spreading epidemic. 

While the impact of the outbreak of the novel coronavirus on China's ability to carry out the phase one trade agreement remains to assessed, Chinese officials are likely considering using a term in the deal about "natural disaster and other unforeseeable events" to consult with US officials for a resolution, Chinese experts close to the government said.

For goods with 10 percent tariffs imposed since September 2019, the rate will be lowered to 5 percent, and for those with 5 percent tariffs, the rate will be halved to 2.5 percent, starting from February 14, the Customs Tariff Commission of the State Council, China's cabinet, said in a statement Thursday.

The adjustment was in response to a US decision in mid-January to cut a 15 percent tariff on $120 billion worth of Chinese goods to 7.5 percent, which is set to take effect on February 14, an official with the commission told the Xinhua News Agency.

The move came after Chinese and US officials signed a phase one trade agreement last month, in which China agreed to increase imports from the US by a total of $200 billion over the next two years. Also, as a result of phase one trade negotiations, the US has committed to rolling back its punitive tariffs on Chinese goods in phases.

Coming at a critical time when China is racing to combat the coronavirus outbreak, which is expected to deal a major blow to the Chinese economy, Thursday's move underscored China's willingness to carry out its commitment to the trade negotiations, Chinese experts said.

"This should reassure the US side that China won't try to hold back its side of the bargain despite enduring a very difficult time," Song Guoyou, director of the Fudan University's Center for Economic Diplomacy, told the Global Times Thursday. "This is in line with both sides' commitment to removing tariffs."

"As for further adjustment, it will depend on the progress and changes to the China-US trade situation," an official with the Customs Tariff Commission said. "We hope to work hard with the US in moving toward removing all additional tariffs."

However, some US officials and government agencies have voiced concerns that the epidemic could impact China's ability or even willingness to meet its commitments in the phase one trade agreement. A US "export boom" from the phase one deal may be delayed because of the virus, White House's economic advisor Larry Kudlow said Tuesday.

Though it remains to be seen how the epidemic will impact China's ability to fulfill its commitment in the phase one deal, China is well within its rights under the agreement to consult with the US over possible impact, said Gao Lingyun, an expert at the Chinese Academy of Social Sciences in Beijing.

"The agreement clearly states in case of natural disaster or other unforeseeable events, both sides should consult with each other to make necessary changes," Gao told the Global Times Thursday. The coronavirus outbreak clearly fits into that category, he said.

A clause in the phase one agreement states " the event that a natural disaster or other unforeseeable event outside the control of the parties delays a party from timely complying with its obligations under this agreement, the parties shall consult with each other."

While Chinese officials have not yet announced any such plan, they are likely considering citing the term in consultation with US officials over the potential impact of the epidemic on the phase one deal, said the experts, who advises the Chinese government in the trade talks.

However, "a decision might not come till China makes a full assessment of the impact of the epidemic, which could be expected at the end of first quarter," Gao said, adding that if the epidemic is contained soon, "it will still not undermine China's ability to fulfill its commitment."

Chinese and US trade officials have been in close contact and the potential impact of the coronavirus is most likely included in the talks, Song added.