China’s Ministry of Finance announced today that China will reduce tariffs by up to fifty percent on certain U.S. imports as the two countries move forward to implement “Phase One” of the trade deal signed on January 15, 2020.  China’s tariff cuts will affect U.S. goods worth approximately $75 billion and will reduce duty rates from 10% to 5% and from 5% to 2.5% depending on the product.  More than 1,700 products will be affected, such as soybeans, automobiles, oil and gas, seafood, and poultry.

The affected U.S.-origin products were originally part of China’s retaliatory tariffs which took effect on September 1, 2019, after the United States implemented the 15% Section 301 List 4A tariffs, which the U.S. has since pledged to reduce to 7.5%. The Finance Ministry indicated that the reasoning behind the decision to reduce tariffs was to “alleviate economic and trade frictions” and to “expand economic and trade cooperation” with the United States.  The proposed tariff cuts are scheduled to take effect on February 14, 2020, to coincide with the implementation of Phase One of the trade agreement.  For additional information on the signing of the U.S.-China Trade Agreement, see our earlier post here.

China’s decision to reduce tariffs has been interpreted by many analysts as a sign of commitment to Phase One of the trade deal with the United States, since it is anticipated that China will be unable to meet the ambitious purchasing targets for U.S. imports that were part of the signed agreement, especially with the current coronavirus epidemic that has significantly slowed China’s economy.  To fulfill the purchasing obligations, U.S. exports to China would need to increase to over $260 billion in 2020 and over $300 billion in 2021.  Such an increase is unprecedented in the history of trade.