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China to slash US tariffs as coronavirus risks deepen | Business


China is to halve additional tariffs on 1,717 US goods following the signing of a phase 1 trade deal that halted the trade war between the world’s two largest economies.

While the announcement reciprocates the US commitment under the deal, it is also seen by analysts as a move to boost confidence amid the coronavirus virus outbreak that has disrupted businesses and dented investor sentiment.

However, as highlighted in reports, Beijing could invoke a disaster-related clause in the trade deal, which might allow it to avoid repercussions even if it cannot fully meet the targeted purchases of US goods and services for 2020.

China’s finance ministry said that from 14 February additional tariffs levied on some goods would be cut to 5% from 10%, and others lowered to 2.5% from 5%.

The ministry did not state the value of the goods affected but the products benefiting are part of the $75bn worth of goods that China said last year it would impose 5% to 10% tariffs on, which came into effect on 1 September.

In a separate statement, the finance ministry said the tariff cuts correspond with those announced by the US on Chinese goods, also scheduled for 14 February.

Further adjustments would depend on the economic and trade situation, the ministry said.

The reductions will cut tariffs on soya beans from 30% to 27.5%. Duties on crude oil will fall to 2.5% from the 5% rate imposed in September. The remaining tariffs were scheduled to kick in on 15 December but were suspended due to the interim trade deal.

“Any move to de-escalate is always good. Especially when the market is overwhelmed by the news about virus, good news about tariff is refreshing,” said Tommy Xie, the of Greater China research at OCBC Bank in Singapore.

“The announcement shows China’s commitment to implement the phase 1 trade deal despite the disruptions from the recent virus outbreak.”

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Markets took cheer from the news as Beijing seeks to shore up confidence in China as the virus outbreak casts deep uncertainty over the economy.

The yuan hit its highest level in two weeks, while Asian stocks and Wall Street futures also rallied.

While the proposed tariff cuts point to clear progress in US-China trade ties, the virus outbreak has cast doubt over just how soon the phase 1 deal could help China’s slowing economy.

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