HOUSTON (ICIS)--The US will abstain from raising tariffs on $250bn worth of Chinese goods next week, part of a preliminary agreement that the two sides reached on Friday.Image by Shutterstock
The tariffs would have risen to 30% from 25% on 15 October, and they covered several petrochemical imports from China.
In return, China agreed to buy $40bn-50bn worth of agricultural products from the US.
The agreement did not remove any existing tariffs that the two countries had imposed on each other. Nor did it cancel their plans to impose even more tariffs in December.
Until the US and China address these existing tariffs, they will likely continue to affect trade flows for plastics and chemicals.
In the US, several chemical and plastic producers expanded capacity with the intention of exporting excess material to China. Because of the tariffs, companies have diverted this material to other countries, often at the sacrifice to margins.
Despite these new plants, the US still imports several chemicals from China, and many of these were covered by the tariffs.
The US introduced these tariffs in multiple stages. In July 2018, it imposed tariffs on $34bn worth of goods. Tariffs on $16bn worth of goods followed in August 2018. Another $200bn were hit with tariffs in September 2018.
The rates on all of these were later increased to 25%. Friday's agreement will not lower this rate or remove any items from these tariffs.
Friday's agreement touched on other areas besides tariffs and agricultural imports.
Trump added that the two sides had made progress on intellectual property and technology transfers.
US Treasury Secretary Steven Mnuchin said this could further open up China to US financial firms. The two sides also addressed transparency in foreign-exchange markets.
"We have pretty much a complete agreement on both of those issues," Mnuchin said.
Trump said the agreement will transpire over multiple phases. Once the first phase is signed, the second will follow immediately. The two sides will start a third phase if they cannot cover everything in the first two.
Reuters quoted Trump as saying that the two sides are very close to ending their trade dispute, and that they will need up to five weeks to get a deal written.
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