BEIJING -- China said Thursday that it will cut tariffs on $75 billion of U.S. imports, including auto parts, in response to American reductions as part of a trade war truce.
The cuts come as China struggles with the mounting cost of measures imposed to contain a virus outbreak that has closed factories, stores and other businesses.
China and the U.S. have announced conciliatory steps since agreeing in October to a phase-one agreement under which Washington canceled planned additional tariff increases and Beijing committed to buy more U.S. farm exports. The deal represented a freeze on the trade war rather than an end, and the countries have pledged to continue talks.
The reductions, to take effect Feb. 14, apply to China's tariffs imposed Sept. 1 as the two sides were ratcheting up their dispute over Beijing's technology ambitions and trade surplus, the Ministry of Finance said.
After the reductions, retaliatory tariffs on American crude oil will be lowered to 2.5% from 5%. Punitive tariffs on soybeans will go down to 27.5% from 30%, and to 30% from 35% for pork, beef, and chicken.
The U.S. had agreed to reduce tariffs on $120 billion worth of Chinese-made goods as part of the preliminary trade deal, and China reciprocated Thursday.
Washington increased tariffs on Chinese goods in 2018 in response to Beijing's multibillion-dollar trade surplus and complaints that China steals or pressures companies to hand over technology. China retaliated with its own increased duties on American goods.
Chinese officials said Thursday that they still hope to eventually eliminate tariffs enacted by both sides. The trade truce left in place most of the new and increased tariffs on $360 billion in Chinese-made goods that Trump began enacting in 2018, setting off the trade war between the two economic heavyweights.
"The next steps depend on the development of the Chinese-U.S. economic and trade situation," said a Ministry of Finance statement. "We hope to work with the United States toward the final elimination of all tariff increases."
Before the next step can happen, China may need to prove to the United States that it plans to buy that $200 billion in goods that it promised in January. That could be difficult for Beijing.
Chinese officials have put large portions of the country on lockdown as they try to contain a coronavirus that has killed hundreds of people and sickened thousands more. Factories and companies across the country have temporarily closed their operations. Major airlines have canceled flights to China.
The Jan. 15 deal has a clause that states that the U.S. and China will consult "in the event that a natural disaster or other unforeseeable event" delays either from complying. Chinese officials are hoping the U.S. will agree to some flexibility on pledges in their phase-one trade deal, people familiar with the situation said, though it is unclear if such a request has been formally raised.
In an interview with Fox Business earlier this week, White House National Economic Council director Larry Kudlow acknowledged that the outbreak could delay China's purchases. But he said the effect on the U.S. economy would be minor.
"We're just trying to help China right now," Kudlow said Tuesday. "It's not going to be that big a deal for us."
But the outbreak and containment threaten to reduce China's economic growth, which could blunt its appetite for American-made goods, meat and crops.
It has also taken China's powerful manufacturing industry to a standstill, as travel restrictions freeze China's workforce, and major companies such as Boeing, Apple and Nike have been forced to close factories until at least the middle of this month. McDonald's, Starbucks, KFC, Levi Strauss, H&M and Samsung have closed stores across China. Casinos in Macao, the world's biggest gambling market, are shutting down for two weeks.
Even if the virus is contained soon, economists are predicting China's growth rate will fall to between 3% and 4% this quarter.
"Reducing tariffs and importing more food from the U.S. makes a lot of sense for the Chinese. The Chinese government is facing a number of homegrown problems, the major one being the outbreak of the coronavirus," said Ed Yardeni, president of Yardeni Research. "They are clearly in need of importing more food. The swine flu epidemic last year decimated their pork supply. Now there is evidence their chickens are facing a virus. They need our food. Food inflation is soaring in China. There have also been disruptions in their transportation system, further complicating the food supply."
China's ministry of agriculture and rural affairs announced an outbreak of the highly pathogenic H5N1 virus that wiped out 4,500 birds on a poultry farm in the Hunan province earlier this week.
U.S. Agriculture Secretary Sonny Perdue said Wednesday that the U.S. should be patient with China if it struggles to hit its targets amid the coronavirus outbreak, Reuters reported.
"If they're really trying and it really just blows the economy out of the water, then we would have to be understanding of that," Perdue said, speaking to reporters at a cattle convention in Texas.
Soybean futures traded with little enthusiasm Thursday in response to China's decision. Hog futures, though, jumped with traders more optimistic for U.S. pork sales as the Asian nation suffers from an epidemic of African swine fever.
"It's something, but it's not a game-changer," Don Roose, president of U.S. Commodities in Iowa, said of the tariff cut. "And they continue to buy cheaper beans from South America."
Soybeans for March delivery finished 0.1% higher at $8.81 a bushel after earlier sliding as much as 0.4%.
Meanwhile, April hog futures surged by the 3-cent-per-pound daily price limit in Chicago, settling at 64.875 cents, the highest this week. The African swine fever outbreak has killed tens of millions of pigs in China, the world's top pork consumer.
Pork is "the one product we think the Chinese really need," Roose said.
Information for this article was contributed by Carlos Tejada of The New York Times; by Taylor Telford of The Washington Post; and by staff members of The Associated Press and Bloomberg News.
A Section on 02/07/2020