China and the United States have agreed to reduce tariffs on $60 billion worth of goods imported from each other. The tariff cuts will apply to a range of products, including US corn, cosmetics, and Chinese household appliances. This move is seen as a significant step towards easing trade tensions between the two countries. The US-China Board of Trade has recommended $30 billion of trade in non-sensitive goods for more favourable tariff treatment.
The reciprocal tariff reduction is one of the key takeaways from the second summit this year between President Xi Jinping and US President Donald Trump. The summit was hosted in Washington last week and also yielded an agreement to extend a trade truce between the two countries. The trade truce has been extended through to January 10, providing room for both sides to evaluate their ongoing arrangement to resolve economic and trade issues.
China has planned to trim duties on a variety of US agricultural goods, including corn, wheat, sorghum, meat, dairy, vegetable oils, and meals. However, soybeans were not included in the list. Beijing will also look to reduce levies on US fish and seafood, logs and wood products, cosmetics, and medical devices. This move is seen as a significant concession by China to meet its commitment to buy $17 billion worth of agricultural goods from the US.
In return, the US will also cut tariffs on Chinese goods, including small appliances such as coffee makers and toasters, tableware, blankets, and bed linens. The lists of products also include toys, fireworks, artificial flowers, Christmas tree lamps, and other holiday decorations, and children's car seats. This reciprocal tariff reduction is expected to unlock improved market access for about 30% of US exports to China.
The extension of the trade truce provides a "relatively stable and predictable policy environment" for cooperation among companies and continued active discussions. Both sides will hold regular talks on potential investment opportunities and barriers, enhancing policy transparency and predictability, and responding to enterprises' concerns. This move is seen as a positive step towards resolving economic and trade issues between the two countries.
Despite the agreement, stocks fell sharply in China on Monday, with investors having few concrete details to cheer from the leaders' summit. Underlying tensions resurfaced, and technology stocks fell on a bipartisan US push to ban Chinese components from data centres. The benchmark blue-chip index slid more than 2% to a one-year low. However, both countries will set up an agriculture working group under a trade council to discuss two-way market access and regulation.
The presidential summit also yielded an agreement for China to import 10 million metric tons of coal annually from the United States in 2027 and 2028. This amount roughly equals 2% of China's coal imports each year. The agreement is seen as a significant step towards increasing trade between the two countries.
Key points
- China and US agree to cut tariffs on $60 billion worth of goods.
- The trade truce between China and US has been extended through to January 10.
- China will import 10 million metric tons of coal annually from the US in 2027 and 2028.
