Background on Key Figures and Relevance
The United States and China have announced a mutual reduction of tariffs as part of a 90-day truce in their ongoing trade war. This development is significant as it involves two of the world’s largest economies, with far-reaching implications for global trade and commerce.
Scott Bessent, the U.S. Secretary of Treasury, and He Lifeng, China’s Vice Premier, played crucial roles in these negotiations. Their discussions took place over two days in Geneva, resulting in a significant agreement.
Key Tariff Reductions
Under this agreement, the United States will reduce tariffs on Chinese imports from 14.5% to 30%. Simultaneously, China will decrease tariffs from 12.5% to 10%. However, it’s important to note that not all Chinese products will see tariff reductions. Other existing tariffs, such as those from Section 301, Section 201, anti-dumping and countervailing duties, and the general tariff rate, will remain in effect.
- Tariffs on products like automobiles, electric vehicles, steel, aluminum, and their derivatives will not be reduced.
- Tariffs imposed by President Donald Trump on over $300 billion worth of Chinese products during his first term will also remain unchanged.
Ongoing Negotiations and Future Agreements
The U.S. and China have committed to establish a mechanism for continued negotiations on economic and trade relations, led by He Lifeng, Scott Bessent, and Jamieson Greer from the White House Trade Representative’s office.
Both countries anticipate ongoing trade negotiations over the coming months, potentially leading to “purchase agreements” by China. The U.S. and China have already made significant progress, according to He Lifeng, describing the talks as “frank, deep, and substantial.”
The current agreement could serve as a foundation for negotiations, building on the Phase 1 trade deal signed by President Trump and China’s then-Vice Premier Liu He in January 2020. This earlier agreement aimed to address trade tensions that began in March 2018 with the U.S. Trade Representative’s (USTR) Section 301 investigation into China’s trade-distorting practices.
The Phase 1 deal included China’s commitment to increase purchases of U.S. goods by an additional $200 billion over two years in four sectors (manufactured goods, services, agricultural products, and energy) compared to 2017 levels.
However, from January 2020 to October 2021, China’s total imports of Phase 1 covered products from the U.S. amounted to $208.3 billion, falling short of the Phase 1 target of $334.8 billion.
Should no agreement be reached within the next 90 days, the U.S. government has stated that mutual tariffs would rise to 34%.
“The purpose of this 90-day pause is to assess what we can do and work on these non-tariff barriers. Because, indeed, China has low tariffs. It’s these insidious non-tariff trade barriers that harm U.S. businesses trying to operate there,” explained Scott Bessent.
Key Questions and Answers
- What is the main agreement between the US and China? Both countries have agreed to reduce tariffs as part of a 90-day truce in their trade war.
- Who were the key figures in these negotiations? U.S. Secretary of Treasury Scott Bessent and China’s Vice Premier He Lifeng played crucial roles.
- What tariffs will be reduced, and which ones will remain? The US will lower tariffs on Chinese imports from 14.5% to 30%, while China decreases tariffs from 12.5% to 10%. However, other existing tariffs like those from Section 301, anti-dumping duties, and general tariff rates will remain.
- What are the ongoing commitments and future expectations? The U.S. and China have committed to continued negotiations, potentially leading to purchase agreements by China. The current agreement could serve as a foundation for these negotiations.
- What happens if no agreement is reached within 90 days? If no agreement is reached, mutual tariffs would increase to 34%.
