China likely weighing response to mixed signals from US over tariffs: expert

A Chinese trade expert who advises the government told the Global Times on Wednesday that Chinese officials are likely weighing up potential responses to a series of mixed signals from the US.

Key notes

• Officials have been touting progress in the phase one trade agreement, while at the same time reinstating tariffs on Chinese products, risking a hard-fought easing in bilateral trade tensions.
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• Starting Wednesday, the US will collect a 25 percent tariff on certain Chinese products after a previous exemption expired and the US Trade Representative's (USTR) office did not extend the exemption on those goods, according to a recent notice from the USTR.
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• In the notice, the USTR said it would extend tariff exemptions for 11 categories of products - part of $34 billion worth of Chinese goods targeted by a 25 percent US tariff imposed in July 2018 - for another year, but left out 22 categories of products, including breast pumps and water filters, according to a comparison of the lists by the Global Times. That means those products will face a 25 percent tariff starting on Wednesday.
• In addition, the US on Tuesday decided to slap anti-dumping and anti-subsidy duties on up to 262.2 percent and 293.5 percent, respectively, on Chinese wood cabinets and vanities imports, Reuters reported on Wednesday.
• More puzzling is the motive behind such a move against the backdrop of the phase one agreement and its implementation, which has been praised by US officials, Gao said.
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• "China will weigh up the possible motives and see how to respond. If this is just a technical issue, then it shouldn't be a big problem. If this is part of strategy to take a swipe at China, it will not go anywhere," he said, noting that it would be "very easy" for China to respond.

Market implications

If COVID-19 wasn't enough to upset markets and cause a potential depression, then a breakdown in the trade truce between the US and China is sure to cause a stir in global financial and commodity markets. However, a time where the US dollar is so strong, China has the upper hand, especially as the number of cases of COVID-19 mounts up in the US and dissipates in China.