By Victor Escribano
Shanghai, China, May 14 (EFE).- Experts have warned that the agreement between China and the United States to reduce reciprocal tariffs for 90 days, starting Wednesday, may not guarantee complete reconciliation between the two countries.
Following two days of intense negotiations in Switzerland, Beijing, and Washington published a t statement confirming an agreement to reduce tariffs for three months: from 125 percent to 10 percent on American imports and from 145 percent to 30 percent on Chinese goods.
The US insisted that it could not lower the additional 20 percent tariff imposed on China due to its role in supplying precursor chemicals for fentanyl that cross the border into Mexico.
During the talks, both parties agreed to create a mechanism for trade dialogue to facilitate further negotiations.
China also pledged to cancel the non-tariff retaliatory measures it has implemented since Apr. 2, such as export restrictions on rare earths, placing American companies on trade blacklists, and launching an antitrust investigation of the American chemical giant DuPont.
Although the tariff cuts are significantly higher than expected, analysts say the truce is unlikely to lead to lasting trade peace.
“The deal is a ceasefire, not a peace treaty. It is perfectly possible that continued disagreements will result in a resumption of hostilities,” said the analysis firm Trivium China.
According to Mark Williams, Capital Economics’s chief Asia economist, Washington still imposes much higher tariffs on Beijing than on other countries and appears to be trying to convince other countries to restrict their trade relations with China.
“There is still a lot of uncertainty around future trade negotiations (…) given the considerable differences between China and the US on key issues,” said UBS chief China economist Wang Tao, who forecasts that there will be back-and-forth US tariffs, as happened in 2018 and 2019.
Williams views the pact as another step backward in the Trump istration’s aggressive posturing.
The yuan’s decline since Trump’s reelection has attracted more customers to China in third markets and if the trend continues China will be able to offset US tariffs of up to 40 percent, said Capital Economics.
“The withdrawal of tariffs is a clear vindication of Beijing’s calculated and proportionate stance in response to the Trump istration’s trade actions,” according to a report released by Trivium China.
According to Wang, eased tensions between the two parties may lead to an improvement in Chinese exports and the domestic economy this year, which would relieve pressure on Beijing to implement additional stimulus measures to offset the de facto cross-trade embargo with the US.
Even after the US agreement, China has not yet claimed victory.
On Monday, the Ministry of Commerce met with exporters and chambers of commerce to convey Beijing’s promise to companies involved in international trade that are experiencing difficulties by helping them find new markets.
The European Union (EU) Chamber of Commerce in China has recently said that companies are more prepared now than a few years ago to face unexpected crises, such as the pandemic, while they wait to see what happens.
Trivium China has urged caution, as volatility in global supply chains is “the new normal”. EFE
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