A task force within China's Ministry of Commerce is currently engaged in collecting lists of items that might qualify for tariff exemptions and is encouraging companies to submit their own requests, a source revealed on condition of anonymity. This move suggests a shift in Beijing's stance, acknowledging the potential economic fallout of the ongoing trade dispute.
Adding to this development, the financial news magazine Caijing reported on Friday, citing its own sources, that Beijing is preparing to include eight semiconductor-related items in the exemption list, notably excluding memory chips. This specific focus on certain semiconductor components could indicate a strategic approach to alleviate pressure on key domestic industries reliant on these imports.
A list encompassing 131 categories of products purportedly eligible for these exemptions circulated widely on social media platforms and among various businesses and trade organizations on Friday. While Reuters could not independently verify the authenticity of this list, the items included a diverse range of goods, from crucial medical supplies like vaccines and essential chemicals to sophisticated industrial components such as jet engines.
Attempts to reach China’s customs department via repeated phone calls were unsuccessful. Similarly, neither the customs department nor the Ministry of Commerce provided immediate responses to faxed inquiries seeking clarification on the matter.
Earlier on Friday, Bloomberg News first reported that China was considering these tariff exemptions. This corroborating report lends further credence to the likelihood of Beijing taking steps to ease the impact of the trade war.
These potential exemptions signal a significant development, indicating that Beijing, much like Washington, is increasingly concerned about the adverse economic consequences rippling across the country as the world's two largest economies navigate a path of decoupling. The high tariffs have disrupted supply chains, increased costs for businesses, and potentially dampened economic activity on both sides.
While Washington has consistently argued that the current trade status quo is economically unsustainable and has already offered limited tariff exemptions for certain electronic goods, China has maintained a firm stance, repeatedly asserting its willingness to endure the conflict unless the U.S. unilaterally lifts its imposed tariffs.
However, beneath this outward assertiveness, the Chinese economy is entering this phase of the trade war with underlying vulnerabilities, including a flirtation with deflation. Domestic demand remains weak, and both consumer spending and overall sentiment have struggled to fully recover to pre-pandemic levels.
In response to the trade pressures, the Chinese government has been actively encouraging tariff-affected exporters to shift their focus towards domestic markets. However, companies have reported that profit margins are generally lower in the domestic market, demand is comparatively weaker, and the reliability of local customers can be less predictable than established international partners.
Therefore, the consideration of tariff exemptions represents a more substantial gesture of support for affected industries. While allowing some resumption of trade could alleviate some of the economic pain within China, it would also concurrently reduce the pressure on the U.S. economy and, by extension, the White House, potentially offering a nuanced pathway for de-escalation or at least a temporary easing of tensions.