President Donald Trump said he was postponing the imposition of 5% extra tariffs on Chinese goods by two weeks, a move that delays the next escalation of the trade war and brightens the backdrop for upcoming trade negotiations.
“At the request of the Vice Premier of China, Liu He, and due to the fact that the People’s Republic of China will be celebrating their 70th Anniversary on October 1st, we have agreed, as a gesture of good will, to move the increased Tariffs on 250 Billion Dollars worth of goods (25% to 30%), from October 1st to October 15th,” Trump wrote on Twitter late Wednesday.
S&P 500 futures climbed 0.5% and the offshore yuan strengthened 0.3% against the dollar. The yen fell.
Negotiators from the two countries are due to meet in Washington in the coming weeks to push forward talks to end the trade war that’s stretching into its second year, causing increasing economic damage. At the same time there’s little sign that substantive progress is being made on their differences, while Trump still has further tariff increases lined up.
On Wednesday, China announced a range of U.S. goods to be exempted from 25% extra tariffs put in place last year, as the government seeks to ease the impact from the trade war. While that move may create some good will in Washington, China is keeping the pressure on U.S. agricultural exports like soybeans produced in key Trump-supporting states.
Trump escalated the U.S.-China trade war in August when he announced an increase in the levy, already in effect, on $250 billion in Chinese goods to 30% from 25% starting Oct. 1. Further increases are planned for December.
The delay “shows Trump doesn’t want to increase tariffs before the trade talks in early October and it creates good conditions,” said Tommy Xie, economist at Oversea-Chinese Banking Corp. in Singapore. “It adds to the hope that there’ll be good news from the October meeting, and markets will wait and see.”
Trump wanted to double tariff rates on Chinese goods last month after Beijing’s latest retaliation in the trade war before settling on a smaller increase, CNBC reported. He was outraged after he learned Aug. 23 that China had formalized plans to slap duties on $75 billion in U.S. products in response to new tariffs from Washington on Sept. 1.
Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer then enlisted multiple CEOs to try and thwart Trump's impulse to slap on more duties. The CEOs called Trump and warn him about the impact such a move would have on the stock market and the economy, CNBC reported.
He settled on a 5% hike in tariff rates on about $550 billion in Chinese products, which he announced in an Aug. 23 tweet after the market close. Mnuchin and White House press secretary Stephanie Grisham said Trump’s only regret was not raising tariffs higher.
Mnuchin has said the U.S. and China have a “conceptual” agreement on enforcement concerns, emphasizing positive progress already made in trade talks, which are set to resume at high levels next month.
“I think the enforcement area we at least have a conceptual, an agreement on,” Mnuchin told Fox Business Network.
He also had a warning: President Donald Trump has no problem keeping heavy tariffs on Beijing if a deal can’t be reached.
Material from Bloomberg and Reuters news services was used in this story.
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