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China takes steps to make good on trade deal

Introduction of waivers unlikely to lead to a drastic surge in buying, as the novel coronavirus outbreak has dashed China’s demand.

By Bloomberg News

China is laying the groundwork to boost purchases of U.S. commodities as Beijing signals that it intends to honor its side of the trade deal with Washington.

The Ministry of Finance on Tuesday published a list of 696 American products including soybeans, pork, beef, corn, wheat, crude oil and liquefied natural gas that will be eligible for relief from the retaliatory duties imposed by Beijing in its tit-for-tat trade war with Washington.

The move came just a day after Bloomberg reported Beijing was considering some purchases of U.S. agricultural goods at the end of February or early March.

They’re initial steps by China in meeting its pledge to buy $200 billion of additional goods and services from the U.S. over the next two years as part of the phase one trade deal reached in January, including $95 billion worth of American commodities.

Bloombergtrade breakdown graphic showing U.S. exports to China prior to trade war

Tuesday’s announcement of commodities eligible for waivers was further evidence that Beijing wants to clear the path to more U.S. imports. It has already been issuing tariff waivers on an ad hoc basis for U.S. farm products, including soybeans, but this is the first time it has expanded the exemptions to include energy products, such as LNG and crude.

Companies that intend to purchase U.S. products on the list can apply for a waiver starting from March 2. Effective for one year once approved, the exemptions will apply to a particular volume of imports and any purchases exceeding that amount will still be subject to the retaliatory tariffs, according to the ministry’s statement.

China had already introduced tariff exclusions on some U.S. goods last year, including pharmaceuticals and lubricant oil. The new list is the most substantial so far and is heavily tilted toward commodities.

One of the purposes of introducing the policy is “to support companies to start purchasing and importing from the U.S. based on the market and commercial rules, so as to create the conditions for the implementation of the China-U.S. phase-one deal,” a separate statement on the finance ministry’s website said.

Without the waivers, the retaliatory tariffs mean U.S. imports are uneconomical for Chinese buyers, hindering efforts to reach the trade deal targets. Until now, firms had also been reluctant to purchase from the U.S. as they weren’t clear on how to proceed with the existing waiver applications, according Li Qiang, chief analyst with Shanghai JC Intelligence Co.

Still, the introduction of waivers is unlikely to lead to a drastic surge in buying, as the novel coronavirus outbreak has dashed China’s demand for energy products such as oil and natural gas.

While Beijing may buy some farm goods in the next few weeks, the virus will probably disrupt the schedule for its purchases for the year, especially in the first quarter, when some shipments may be delayed, according to people familiar with the matter. It will seek to make up for the delayed purchases later in the year assuming the virus is controlled, the people said.

--With assistance from Isis Almeida.
To contact Bloomberg News staff for this story:
Stephen Stapczynski in Singapore at sstapczynsk1@bloomberg.net;
Niu Shuping in Beijing at nshuping@bloomberg.net;
Miao Han in Beijing at mhan22@bloomberg.net
To contact the editors responsible for this story:
Ramsey Al-Rikabi at ralrikabi@bloomberg.net
Alexander Kwiatkowski, James Poole
© 2020 Bloomberg L.P.
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