Yen Mostly Weakens After U.S. Extends China's Trade Deal Deadline
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Yahoo
12 minutes ago
- Yahoo
US and China extend trade truce for another 90 days
US President Donald Trump has extended a trade truce with China for another 90 days, delaying once again a dangerous showdown between the world's two biggest economies. Mr Trump posted on his Truth Social platform that he signed the executive order for the extension, and that 'all other elements of the Agreement will remain the same'. Beijing at the same time also announced the extension of the tariff pause, according to the Ministry of Commerce. The previous deadline was set to expire at 12.01am on Tuesday. Had that happened the US could have ratcheted up taxes on Chinese imports from an already high 30%, and Beijing could have responded by raising retaliatory levies on US exports to China. The pause buys time for the two countries to work out some of their differences, perhaps clearing the way for a summit later this year between Mr Trump and Chinese President Xi Jinping, and it has been welcomed by the US companies doing business with China. China said on Tuesday it would extend relief to American companies who were placed on an export control list and an unreliable entities list. After Mr Trump initially announced tariffs in April, China restricted exports of dual-use goods to some American companies, while banning others from trading or investing in China. The Ministry of Commerce said it would stop those restrictions for some companies, while giving others another 90-day extension. Reaching a pact with China remains unfinished business for Mr Trump, who has already upended the global trading system by slapping double-digit taxes – tariffs – on almost every country on earth. The EU, Japan and other trading partners agreed to lopsided trade deals with Mr Trump, accepting once unthinkably US high tariffs (15% on Japanese and EU imports, for instance) to ward off something worse. In June, the US and China reached an agreement to ease tensions. The US said it would pull back export restrictions on computer chip technology and ethane, a feedstock in petrochemical production, and China agreed to make it easier for US firms to get access to rare earths. 'The US has realised it does not have the upper hand,' said Claire Reade, senior counsel at Arnold & Porter and former assistant US trade representative for China affairs. In May, the US and China had averted an economic catastrophe by reducing massive tariffs they'd slapped on each other's products, which had reached as high as 145% against China and 125% against the US. Those triple-digit tariffs threatened to effectively end trade between the US and China and caused a frightening sell-off in financial markets. In a May meeting in Geneva, America's tariffs went back down to a still-high 30% and China's to 10%. Ms Reade does not expect much beyond limited agreements such as the Chinese saying they will buy more American soybeans and promising to do more to stop the flow of chemicals used to make fentanyl and to allow the continued flow of rare-earth magnets. But the tougher issues will likely linger, and 'the trade war will continue grinding ahead for years into the future', said Jeff Moon, a former US diplomat and trade official.
Yahoo
12 minutes ago
- Yahoo
Analysis-China factories cut shifts and workers' pay as US tariffs bite
By David Kirton GUANGZHOU, China (Reuters) -Mike Chai aims to cut wage costs at his kitchen cabinet factory by about 30% to remain competitive against other Chinese firms, which have stopped selling to the U.S. due to steep tariffs and are now coming after his long-time customers in Australia. Chai had already halved his workforce to 100 people since the pandemic and says he has no more room to trim. Instead, he is shortening shifts and asking workers to take unpaid leave - an increasingly common practice that has become a hidden deflationary force in the world's second-largest economy. "We're in survival mode," said the 53-year-old, adding that his company, Cartia Global Manufacturing, in the southern city of Foshan, "barely breaks even." "I told them, you don't want our factory to go broke. You've worked here for 10-15 years, let's do it together." China's headline unemployment rate has held around 5% as U.S. President Donald Trump raised tariffs on imports from China by 30 percentage points this year. Washington and Beijing extended on Monday a tariff truce for another 90 days, during which tariffs will not return to April's triple-digit levels. But economists say underemployment - which, in common with other economies, is not tracked in data - is worsening due to higher levies and industrial overcapacity, squeezing workers' income, undermining their confidence about the future and prompting them to spend less. Consumer confidence lingers near record lows, retail sales have weakened, and inflation in July was zero. Alicia Garcia-Herrero, chief Asia-Pacific economist at Natixis, says it is China's manufacturing workers who suffer while exports - and the economy - keep growing despite the U.S. tariffs. "It's the people who are hammered by this model of huge competition, lower prices, thus you need to lower costs, thus you need to lower wages. It's a spiral," she said. "The model is crazy. I'm sorry, but if you need to export at a loss, do not export." Statistics will not reveal Chinese workers as "the main losers" in the trade war because "they will not become unemployed, but they will get unpaid leave of absence or work fewer hours," she added. Chai has already lost two key customers in his main market of Australia after other Chinese firms cut their prices and his factory is operating at half-capacity. "All those who have (left) America have come to Australia," he said. "A lot of new supply is knocking on my customers' doors." While Chinese exports to the U.S. dropped 21.7% year-on-year in July, they rose by 9.2% to the European Union, 16.6% to the Association of Southeast Asian Nations and 14.8% to Australia. Chai plans to cut prices by about 10%. To afford that, he is also cutting overtime - which previously made up more than a third of workers' income - from 28 days per month in total to about 10. On average, his workers earn 5,000 yuan ($697) a month before overtime. Factory bosses are also turning to temporary workers, hiring them for new orders and dismissing them when demand dries up. Dave Fong, who co-owns three factories in southern China making everything from school bags to climbing gear and industrial machinery, says he laid off 30 full-time workers at one of the plants, then rehired some of them on a temporary basis to fulfil unexpected orders. "We prefer temporary contracts so we don't need to pay pension or insurance," said Fong. "It's by day or by hour." "If we don't do that, the company hits a dead end. The market is weak because consumption power has decreased. Another factor is trade, especially with the U.S." SUDDEN DROP Temporary work is common in China, especially among its nearly 300 million rural migrants. Chen Chuyan, a recruiting agent in the central city of Wuhan, says the going rate has dropped to 14 yuan per hour from 16 yuan last year. "There's a long line of people waiting for job interviews every day, but the factories don't have that much demand," Chen said. Alan Zhang has taken such jobs in Datang village, a cluster of small garment factories in the southern city of Guangzhou, since 2021. Back then, he earned 400 yuan a day, but now he struggles to find work paying even half that amount. "If it's just a couple hundred yuan, I won't take it," said the 30-year-old, after scanning handwritten ads for temporary work held by recruiters lounging on scooters. "I don't know what happened. Suddenly it got really hard to find anything. Prices dropped fast," said Zhang, who pays 700 yuan per month to rent a studio flat in Datang with his wife, who also works in clothing factories. He worked just 14 days in July, which worries him because he must raise 10,000 yuan every year for his son's kindergarten fees. The boy lives with grandparents in Zhang's hometown in neighbouring Fujian province. "If manufacturing wages are being squeezed, then the wider economy would feel deflationary pressure," said Richard Yarrow, a fellow at Harvard Kennedy School's Mossavar-Rahmani Center for Business and Government. "This is definitely a growing issue for some of the lower-skill types of manufacturing in China, such as textiles, furniture, and simple electronics." LOW-BALLED At the Longhua employment market in the tech hub of Shenzhen, dozens of people browsed bulletin boards for electronics factory jobs paying 17-28 yuan per hour. Mo, 26, who has a degree in digital marketing but could not find a job in the field, had already had two interviews by early afternoon. He declined the offers because the terms were not as advertised. "They'll say 23 yuan, but actually give you 20," said Mo, only giving his surname for privacy reasons. "Then they'll take management fees, housing, cleaning, and whatever else they can deduct." Huang, 46, was checking the market for a fifth straight day, having arrived by bus from the southwestern province of Yunnan. He managed real estate projects before the property market crash. Now he is divorced and lives on 10 yuan meals, paying 25 yuan per night for a bed in a dormitory. He cannot afford anything else until he finds work. "I had one interview this morning but they asked for an upfront placement fee of 80 yuan," said Huang, dragging a small suitcase. "So I didn't go. I bought some food instead." ($1 = 7.1780 Chinese yuan renminbi) (Additional reporting by Claire Fu in Singapore and Beijing newsroom; Graphics by Kripa Jayaram; Editing by Marius Zaharia and Kate Mayberry) Sign in to access your portfolio
Yahoo
12 minutes ago
- Yahoo
US and China extend tariffs deadline again
The world's two largest economies, the US and China, have again extended the deadline for tariffs to come into effect. A last-minute executive order from US President will prevent taxes on Chinese imports to the US from rising to 30%. Beijing also announced the extension of the tariff pause at the same time, according to the Ministry of Commerce. Those tariffs on goods entering the US from China were due to take effect on Tuesday. The extension allows for further negotiations with Chinese Premier Xi Jinping and also prevents tariffs from rising to 145%, a level reached after tit for tat increases in the wake of Trump's so-called liberation day announcement on 2 April. It's the second 90-day truce between the sides. The countries reached an initial framework for cooperation in May, with the US reducing its 145% tariff on Chinese goods to 30%, while China's 125% retaliatory tariffs went down to 10% on US items. A tariff of 20% had been implemented on when Mr Trump took office, over what his administration said was a failure to stop illegal drugs entering the US. Sector-specific tariffs, such as the 25% tax on cars, aluminium and steel, remain in place. Chinese stock markets were mixed in response to the news, with Hong Kong's Hang Seng down 0.08% The Shanghai Composite stock index rose 0.46%, and the Shenzhen Component gained 0.35%.
