China's latest move shows that it's committed to fighting Trump in the trade war for the long haul
- China announced that it would cut tariffs on roughly 1,500 goods starting November 1.
- The move comes days after the latest round of tariffs in the US-China trade war went into effect.
- China's tariffs cut shows that the government is settling in for a protracted trade war with President Donald Trump and the US.
- The tariff cut will decrease inflationary pressures on Chinese consumers and help to build relationships with non-American suppliers.
China's government announced Wednesday that the country will cut import tariffs on a slew of goods, in an effort to lessen the impact of the trade war with the US.Duties on textiles, construction equipment, and more than 1,500 other goods will drop on November 1, according to the Chinese government. According to Chinese state media, the move is expected to save consumers in the country 60 billion yuan, or roughly $8.7 billion.Advertisement
The move also shows that the Chinese government is digging in and expects the trade war with the US to last for the foreseeable future.
All indications have pointed to a protracted trade war, as China canceled talks following President Donald Trump's latest round of tariffs and the US is already threatening another round of restrictions.But Wednesday's move also shows that Beijing is also trying to tweak economic conditions in the country to weather a protracted fight, said Edward Alden, a senior fellow at the Council on Foreign Relations.
"Cutting tariffs makes a lot of sense," Alden said. "If you're worried about strengthening China's position in the supply chain, if you cut tariffs - especially on intermediate goods - that helps the competitiveness of company's within China and it helps keep down consumer costs at a time the tariff war is driving them up."Essentially cutting tariffs for non-US goods will act as a release valve for some of the pressure from the trade war. Businesses and consumers in China won't see as dramatic of an increase in the cost of goods, which decreases public pressure on the government to come to an agreement with the US.Additionally, the cut is likely to increase pain on US manufacturers as Chinese consumers shift away from more expensive American goods toward cheaper alternatives from other countries. Scott Kennedy, a Chinese economic expert at the Center for Strategic and International Studies, said this means gains from the cut will go to non-US firms.Advertisement
"In principle these tariff cuts should apply to all imports, including those from the United States," Kennedy told Business Insider. "But China is still likely to leave in place its retaliatory tariffs, meaning the benefits of these tariff cuts will go to other countries."Advertisement
"Those tariff cuts are mostly going to benefit competitors of the US and that helps China build goodwill elsewhere," he said.
In July, China announced cuts to tariffs on cars and other goods such as apparel and appliances. In all, Reuters estimated that China's average tariff level will drop to 7.5% in 2018 form 9.8% in 2017.Kennedy said that while the move does give a small boost to imports that should help other countries, it does not signal a broad shift in Chinese economic policy.Advertisement
"The most important barriers to imports and foreign investment are non-tariff barriers," Kennedy said. "No one should see this announcement as a turn away from industrial policy and the dominant focus on supporting domestic Chinese companies."