China pushes for removal of US tariffs

  • Market: Crude oil, Natural gas
  • 10/11/21

Beijing is pressing for the removal of punitive tariffs Washington imposed on Chinese imports in 2018 as the two countries are restarting trade discussions for the first time since last year.

China's vice premier Liu He asked for the removal of tariffs and economic sanctions imposed by the US in recent years in his 8 October conversation with US trade representative Katherine Tai. The US official, in turn, asked for China to fully implement an interim deal signed last year that, among other issues, required China to buy $69bn worth of US crude, LNG and other energy commodities in 2020-21.

The Tai-Liu conversation marks the restart of US-China trade discussions for the first time since summer 2020. Tai last week gave a major trade policy speech outlining President Joe Biden's strategy for dealing with China — a strategy that retains most practices enacted by former president Donald Trump's administration. The US has no plans to remove tariffs on imports from China imposed under Trump, but is going to expand the use of exemptions from those tariffs for US importers, Tai said.

The trade war launched by Trump in 2018 resulted in a 5pc tariff imposed by China on imports of US crude and a 25pc tariff on US-sourced LNG. The rates were cut by half after the countries negotiated the so-called "phase one" agreement in January 2020. Under the terms of that agreement, Beijing was required to step up purchases of US agricultural and energy commodities and manufacturing products by $200bn relative to a 2017 baseline. But on the energy front, China has met less than 40pc of its purchase commitments in 2020 and between 42-56pc in 2021, according to calculations by Washington think tank Petersen Institute.

The phase one deal briefly resulted in record-high levels of US crude exports to China in summer 2020, in part because Beijing leaned on state-owned firms to step up purchases from the US. But crude exports to China trended lower since then, averaging 271,000 b/d in January-July — down by a third from the same period last year.

US LNG exports to China over the same period increased by almost four times because of rising gas demand in China.

The phase one deal was so named because the Trump administration was expecting to negotiate a follow-up agreement — phase two — to increase purchases of US goods by China. The Biden administration says it has no plans for such an agreement, preferring instead to provide financial incentives for US-based companies to start domestic manufacturing in industries where the US believes China has gained overwhelming advantage, including semi-conductors and solar panels.

Liu and Tai said they plan to continue trade discussions.


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