China May Exclude Some U.S. Goods from Tariffs as Costs Rise
The Chinese government is considering suspending 125% tariffs on some U.S. imports, people familiar with the matter said, as the economic costs of a tit-for-tat trade war weigh heavily on certain industries.
Authorities are considering eliminating additional levies on medical equipment and some industrial chemicals such as ethane, the people said, asking not to be identified discussing private deliberations.
Officials are also discussing exemptions on aircraft leases, the people said. Like many airlines, Chinese carriers don’t own all their planes and pay third-party companies leasing fees to use some jets that would be financially hurt by the additional tariffs.
Market reaction to the possibility of some goods being exempted was swift, with the offshore yuan rebounding to a slight gain of 7.2857 per dollar, erasing Friday’s early loss of 0.1%. The exemptions China is considering mirror a similar move by the U.S., which exempted electronics from a 145% tariff on Chinese imports earlier this month.
The pullback reflects how deeply intertwined the world’s two largest economies have become, with some key industries grinding to a halt as the trade war escalates. While the U.S. imports far more from China than vice versa, Beijing’s move highlights areas of its economy that remain dependent on U.S. goods.
China is the world’s largest plastics producer but some of its factories rely on ethane, much of which is imported from the U.S. And its hospitals rely on advanced medical equipment such as magnetic resonance imaging and ultrasound machines made by U.S. companies such as GE Healthcare Technologies Inc. China’s Finance Ministry and General Administration of Customs did not respond to requests for comment.
The list of exemptions is still changing and discussions may not progress. Companies in vulnerable sectors have been asked by authorities to submit customs codes for U.S. goods they need to be exempted from the new tariffs, other people familiar with the matter said. At least one Chinese airline has been told that payments to aircraft leasing companies located in free-trade zones will not be subject to the new levies, one person said.
Traders have also circulated lists of customs codes purportedly exempted from tariffs that relate to key chemicals and chip-making components. Bloomberg News could not independently verify the lists. Beijing is also preparing to waive additional tariffs on at least eight semiconductor-related products, Caijing reported Friday, citing anonymous sources.
Those categories exclude memory chips for the time being, the outlet said, in a potential blow to Micron Technology Inc., the world’s No. 3 memory chipmaker. Investors have been looking for signs that the two countries will engage on tariffs, but relations appear to be stalled. On Thursday, Chinese officials publicly demanded that the U.S. lift all unilateral tariffs before agreeing to trade talks.
President Donald Trump has tried to reach President Xi Jinping by phone since he returned to office, but the Chinese leader has so far rebuffed, instead pushing for low-level talks to reach a deal.
On the U.S. side, the Trump administration has exempted smartphones, computers and other electronics from so-called reciprocal tariffs — a major reprieve for global technology makers including Apple Inc. and Nvidia Corp., though potentially temporarily. The exemptions apply to smartphones, laptop computers, hard drives, computer processors and memory chips, and flat-panel displays.
Source: Bloonberg
