China is planning to cut the average tariff on imports from the majority of its trading partners as soon as next month, two people familiar with the matter said, in a move that would lower costs for consumers as a trade war with the US deepens.
Chinese Premier Li Keqiang (李克強) on Wednesday said that China would further reduce the tariffs, without elaborating.
By cutting duties on goods even as it retaliates against US President Donald Trump’s trade war with higher charges on some US goods, China is following through on long-stated goals to boost imports.
The move comes as the nation is trying to stimulate domestic consumption to support a slowing economy and follows similar cuts to tariffs in July on a wide range of consumer goods.
The offshore yuan pared its loss to rise briefly following the news, then weakened to trade 0.07 percent lower at 6.8562 per US dollar as of 1:02pm in Hong Kong. The onshore rate was little changed at 6.8505.
“By further cutting import taxes, China is sending a message that it will keep opening up and reform no matter how the trade war goes. It’s more like a commitment to both domestic and international audience. It’s a gesture,” Singapore-based Oversea-Chinese Banking Corp Ltd (華僑銀行) economist Tommy Xie (謝東明) said.
China’s most-favored nation (MFN) average tariff stands at 9.8 percent. The rule requires all nations to be treated equally unless specific exceptions are agreed, and the US is also covered by MFN status.
China still has a higher average tariff rate than many developed economies. The US’ average applied MFN rate was 3.4 percent last year and, in general, the Trump administration has accused China of being a protectionist economy.
Li said that his government would not devalue the currency to boost its exports.
We “must uphold multilateralism, the rules of free trade,” he said. “No matter what changes are needed to the rules, it brings benefits. If there are problems, negotiation is needed to solve them.”
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