China announced on Thursday that it will halve additional tariffs on $75 billion worth of US imports, as the world’s two largest economies continue to step back from a years-long trade war that has hurt both countries and dented global growth.
The move comes as China is grappling with the escalating coronavirus outbreak. The disease has killed 565 people, mostly in China, and infected more than 28,000 people in over 25 countries and territories.
The reduction affects US goods that China imposed tariffs on last September. Starting next week, China will cut the additional 10% tariff rate it enacted back then on some goods to 5%. Other goods that were taxed an extra 5% will now be levied 2.5%, according to a statement from China’s State Council Tariff Commission.
The commission added that other tariffs on US goods will be maintained while it continues to work on exemptions.
“China hopes that both sides will abide by bilateral agreements and make an effort to implement relevant provisions so that we can boost market confidence, promote bilateral trade relations and global economic growth,” the statement said.
These tariff rollbacks had been widely expected and were a gesture in response to the United States cutting its September round of tariffs by half in the “phase one” trade deal, according Tommy Wu, an economist with Oxford Economics.
“Nevertheless, the announcement may help boost market sentiment, especially at a time when China is battling with the economic impact of the coronavirus outbreak,” he said.
Wu and other experts have warned that the coronavirus outbreak could dent China’s economic growth this year and have knock-on effects for the global economy.
When the outbreak hit, Beijing took the extraordinary step of placing major cities on lockdown in order to contain it. The government also extended the Lunar New Year holiday, effectively bringing factories around the country to a standstill as workers have been ordered to stay home. Millions of people have pulled back on consumption, as they hunker down indoors and avoid public spaces.
Washington officials earlier this week said the outbreak could delay exports of US goods to China. Last month, Beijing had agreed to buy an additional $200 billion worth of products from the United States as part of a “phase one” trade deal.
“It is true the ‘phase one’ trade deal, the export boom from that trade deal, will take longer because of the Chinese virus,” Larry Kudlow, US President Donald Trump’s chief economic adviser, said in an interview with Fox Business on Tuesday.
Agricultural goods such as soybeans, pork, cotton and wheat had accounted for a big chunk of the new purchases.
On Wednesday, US Secretary of Agriculture Sonny Perdue said the United States should be patient with China’s ability to meet those trade pledges, given the coronavirus outbreak.
“If they’re really trying and it really just blows the economy out of the water, then we would have to be understanding of that,” Perdue said, according to Reuters.
Oxford Economics earlier this week cut its GDP forecast for China, saying that even with a rebound in the second quarter of this year, “we now forecast 5.4% growth for 2020, compared with 6% previously.”