China's latest move shows that it's committed to fighting Trump in the trade war for the long haul
Trending News
Reuters/Pool
Chinese president Xi Jinping
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.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."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."
Already Chinese producers are turning to non-American sources for their needs and the combination of higher tariffs on US goods and lower duties on other goods will likely speed up that shift.
Alden says this is also part of China's long-term strategy. By building relationships with other countries, China can grow its economic influence around the world and wean itself off of an economic reliance with the US."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.Copyright © 2021. Times Internet Limited. All rights reserved.For reprint rights. Times Syndication Service.
Next