In a major move to stabilize trade relations with Beijing, US President Donald Trump has announced that his administration will reduce fentanyl-related tariffs on imports from China and maintain a freeze on some reciprocal tariffs on Chinese goods.
The actions, carried out in a pair of executive orders issued on Tuesday, formalize key elements of a sweeping trade deal struck in October with Chinese leader Xi Jinping in South Korea. Trump and Xi Jinping met on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit.
The cut tariffs, effective Nov. 10, mark a major step back from an escalating trade war, easing the burden on U.S. importers while securing China’s key commitments on counternarcotics and agriculture, Bloomberg reported.
Tariff reduction leads to de-escalation
The most immediate change is the reduction in the tariff on fentanyl, which will be halved from 20% to 10%. Trump cited “progress in China’s efforts” to do more to curb the smuggling of the deadly drug into the United States, pointing to Beijing’s commitment to “take significant action to end the flow of fentanyl.”
The measure also includes halting the supply of certain specified chemicals to North America and strictly controlling the export of certain other chemicals to all global destinations, Trump said in the order.
At the same time, Trump also extended for a year a truce that allowed him to reduce his mutual tariff rate from 34% to 10%.
China is committed to minerals and agriculture
The reduced rates represent a significant concession to China. In return for the concessions, China committed to several economic and national security priorities for the United States.
In explaining his decision to further extend the tariff pause, Trump cited China’s commitment to lift export controls on rare earth elements and other critical minerals and address retaliation against U.S. semiconductor manufacturers.
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China also pledged to buy U.S. agricultural exports, including soybeans, sorghum and roundwood, and agreed to suspend its own retaliatory tariffs on “huge amounts” of U.S. agricultural products, Trump said, according to Bloomberg.
Trump also noted that the State Department and Department of Homeland Security will continue to monitor China’s implementation of the agreement. “Should the PRC fail to meet its obligations described in Section 1 of this order, I may modify this order as necessary,” the president said.
Contract duration and other details
The deal is expected to last one year and stabilize turbulent relations between Washington and Beijing, which have seen threats escalate in a bid to gain leverage ahead of the summit. But the Trump-Xi deal falls short of any lasting pact, setting the stage for new negotiations a year from now and potential disagreements over enforcement sooner.
While the lower tariffs are a relief for US businesses and importers, the deal is expected to draw criticism from China hawks who advocate greater isolation of China due to its history of predatory trade practices and dumping. The tariff rate on Chinese goods is now almost the same as the charges applied to several Southeast Asian countries, mitigating the comparative disadvantage China has faced.
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The future of ties between the world’s two largest economies will be judged by the planned meetings. Trump said he expects to visit China in the first half of next year and host Xi Jinping in the US shortly after that trip. These meetings will serve as crucial indicators for the status of the ceasefire. The deal also remains under a cloud of legal uncertainty as the US Supreme Court reviews the constitutionality of Trump’s use of emergency powers to impose tariffs on specific countries, Bloomberg said in a report.
Key things
- The reduction in tariffs on fentanyl and the freezing of some Chinese tariffs represent significant concessions in trade negotiations between the US and China.
- As part of the deal, China pledged to remove controls on rare earth exports and buy U.S. agricultural exports.
- Continued legal uncertainty over the tariffs complicates the deal as the US Supreme Court reviews the constitutionality of Trump’s emergency powers.
