US-China talks advance, but questions remain over rare earths, de minimis

The US will lower extra tariffs on Chinese goods from 145% to 30%, while China will cut tariffs on US products from 125% to 10%. However, uncertainty remains over rare earth exports.

The US and China have agreed to reduce many of the trade penalties they had imposed on each other, bringing an end to the worst part of their trade war. The agreement, reached during talks in Geneva, will take effect by Wednesday, according to a report by Reuters. While this deal marks a significant step toward peace in the trade war, several questions remain.

 

The US will reduce extra tariffs it had placed on Chinese goods from 145 per cent to 30 per cent. Similarly, China will lower its tariffs on US products from 125 per cent to 10 per cent. However, not all taxes will be eliminated—particularly those imposed before April 2, including some instituted during the tenure of former US President Donald Trump.

 

The US will modify or remove three orders that had together imposed 115 per cent in tariffs on Chinese imports. One set of tariffs, known as 'Liberation Day' tariffs, will drop from 34 per cent to 10 per cent for the next 90 days. The US will also remove all tariffs added during the back-and-forth negotiations of the trade dispute.

 

In response, China has decided to retain only a 10 per cent tariff on goods taxed after April 2. However, when older tariffs are factored in, Chinese goods will still face a 30 per cent US tariff. Products such as electric cars, steel, and aluminium will continue to be subject to separate penalties.

 

Rare earths remain a key issue

 

China's export controls on rare earths affect all countries, not just the US, making it unclear whether these measures will be impacted by the new agreement. China's Commerce Ministry has not clarified the matter, and its Foreign Affairs Ministry has referred only to the text of the agreement.

 

Non-tariff measures also paused

 

China has agreed to remove non-tariff actions it took after April 2. These measures included placing rare earth metals on a restricted export list, investigating US chemical company DuPont, and banning several US tech and defence companies from doing business in China. Although these actions are expected to be reversed, details remain unclear.

 

However, actions taken before April, such as blacklisting a dozen US companies and investigating Google, will remain in place.  [With inputs from Reuters]