China has quietly exempted some semiconductors from tariffs, and is considering more exclusions for certain US industries, as the world’s two largest economies attempt to navigate a trade war with potentially devastating effects, according to reports.
Taxes on at least eight classifications of US microchips have been lowered to zero, a huge drop from China’s 125% retaliatory tariff on all other US goods, Caijing, a Chinese financial magazine, reported on Friday.
Though the article was later deleted, two importers confirmed that certain semiconductors have been spared from the hefty duties, according to The Washington Post.
Chinese officials are weighing further exemptions on medical equipment and some industrial chemicals like ethane, sources familiar with the matter told Bloomberg.
The government is also considering removing the tariff on plane leases, sources said. Chinese airlines, like most other carriers around the world, do not own all of their planes. Instead, they pay leases to third-party companies.
China’s embassy in the US did not immediately respond to The Post’s request for comment.
In the public eye, however, China has appeared resistant to de-escalating heightened trade tensions, claiming that trade talks with the US haven’t even started yet after Trump indicated that lower rates on the nation are in the works. The nation called for the US to revoke all “unilateral” tariffs.
Later on Thursday, Trump said that the White House has been meeting with Chinese officials, claiming there had been a meeting that same morning.
Shares in Asia soared and the yuan erased losses after news of the potential exemptions circulated.
“It’s another step toward a de-escalation of the trade war,” Kok Hoong Wong, head of institutional equities sales trading at Maybank Securities Pte, told Bloomberg.
While most believe it’s unlikely that US-China tensions will ease quickly, “it would appear the worst may truly be over,” he added.
Neither Beijing nor the US want to be the first to blink in the trade war. But China’s exemptions indicate the nation is concerned about layoffs and factory closures slamming their snail-paced economy.
Its exemptions on semiconductors mirror steps the US took earlier this month, excluding electronics from Trump’s 145% levy on Chinese goods – a huge win for Apple and Nvidia, which rely on China for cheap manufacturing.
And while China is the world’s largest plastics manufacturer, those facilities often rely on ethane imported from the US. The nation’s hospitals depend on advanced medical equipment, like magnetic resonance imaging and ultrasound machines, from the US.
During Trump’s first term, amid heightened US-China trade tensions, China’s Finance Ministry launched a system for companies to request sector-specific tariff exemptions.
Taking responses into consideration, it then created exclusions that would prevent certain major industries from suffering large losses, experts told The Washington Post.
“A couple of our member companies have reported that even within the last week, they had a few shipments that were imported that did not have tariffs levied on them,” Michael Hart, president of the American Chamber of Commerce in China, said during a press conference on Friday.
“It does look like both governments are looking carefully and don’t want to stop trade overall,” Hart continued.
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