Now China signals backing down from tariff war, mulls exempting some US imports over rising cost

China is considering suspending the 125 per cent tariffs on some US imports, as Beijing realises that the economic weight of a tit-for-tat trade war with Washington is heavy on some of its industries.

According to a report by Bloomberg, the Chinese government is mulling to remove the additional tariffs, which were announced following Trump’s declaration of reciprocal levies earlier this month, on medical equipment and some industrial chemicals like ethane.

Although the US imports significantly more from China than it exports, Beijing’s recent actions highlight sectors of its economy still dependent on American goods. For instance, China, the world’s largest plastic producer, relies heavily on the US for the supply of ethane. The country’s healthcare system depends on sophisticated medical equipment, such as MRI and ultrasound machines, manufactured by American companies like GE Healthcare Technologies Inc.

How is China planning to suspend tariffs?

While the Bloomberg report says that China’s list of products that it’s planning to exempt from the additional tariffs is not full and final yet, the government has asked companies to submit their customs codes for US goods that they deem should be exempted from the new tariffs.

Traders have been circulating what are said to be tariff-exempt lists of customs codes linked to essential chemicals and semiconductor components.

Meanwhile, investors are watching for indications that the two nations will take steps to reduce tariffs, but tensions seem to remain at an impasse. On Thursday, Chinese officials publicly called on the US to remove all unilateral tariffs before entering into trade discussions.

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Trump’s former envoy says tariff cuts could come soon

At the same time, US President Donald Trump’s former envoy to China, Terry Branstad, has said that Washington may lower tariffs on Chinese goods to revive trade talks.

“And then we need a reciprocal response from the Chinese that shows they have an interest in it," he said earlier this week.

“And we’ll see. I don’t know that there will be a deal, but I know that Trump would like to see one at the end of the day … I think Trump wants it to happen quicker and not take years. So we’ll see what happens, but I suspect we’ll see movement within the next year,” he added.