03-05-2025
China quietly exempts about a quarter of US imports from tariffs: Sources
A list of exempted US products covering 131 items like pharmaceuticals has been reportedly circulating among traders and businesses over the past week. PHOTO: AFP
– China has quietly started to exempt some US goods from tariffs that likely cover around US$40 billion (S$51.9 billion) worth of imports, in what looks like an effort to soften the blow of the trade war on its own economy.
A list of exempted US products covering 131 items such as pharmaceuticals and industrial chemicals has been circulating among traders and businesses over the past week. Some of these products were previously reported by Bloomberg.
It is unclear where the list came from and it has not been officially confirmed, but at least half a dozen companies in China have been able to bring in goods from the list without paying tariffs, according to people familiar with the matter, who asked not to be identified discussing confidential information.
The 131 items are worth about US$40 billion, or around 24 per cent of Chinese imports from the US in 2024, Bloomberg calculations based on China Customs data show.
The move echoes steps taken by the Trump administration to exempt smartphones and other electronics from its own 'reciprocal' tariffs, including the 145 per cent tariffs on China. Those US exemptions apply to about US$102 billion, or roughly 22 per cent, of US imports from China in 2024, according to estimates by Mr Gerard DiPippo, associate director of Rand China Research Centre.
The notion that China's exemptions largely mirror the US ones suggests this is more of a strategic move to match Washington's actions rather than purely a goodwill gesture. It also points to Beijing's priority of shielding its own economy from the fallout of the trade war.
'China is likely trying to mitigate damage to its economy by avoiding a collapse in key imports,' Mr DiPippo said. 'The exemptions shouldn't be interpreted as a signal to the US, as China has been quiet about its exemptions, working through business channels and avoiding public statements.'
There are tentative signs the US-China trade stand-off could be shifting. The Chinese Commerce Ministry said on May 2 that it is assessing the possibility of trade talks with the US, giving a lift to equity markets.
'The US has recently sent messages to China through relevant parties, hoping to start talks with China,' the ministry said in a statement released during a national holiday. 'China is currently evaluating this.'
Chinese officials began asking foreign companies as early as the second week of April to name the US imports that are essential to their operations and cannot be replaced easily, said the people. Since then, some of those items have received waivers from China's 125 per cent tariffs on the US goods.
The list of exemptions is said to be dynamic and will be continuously adjusted depending on China's needs, according to people familiar with the matter. More products may be added, while some could be removed if China manages to find substitutes, said one of the people.
China's General Administration of Customs did not respond to a faxed request for comment during a Chinese holiday.
Bloomberg reported earlier that the Chinese government is considering lifting tariffs for certain medical devices and industrial chemicals like ethane. Officials are also discussing waiving the tariff on aircraft leasing.
While the US imports far more from China than the other way around, the exemptions highlight areas where Beijing still relies on American products. For example, China is the world's largest plastics manufacturer, but some of its factories depend on ethane – a feedstock mainly imported from the US.
China has already granted exemptions to two domestic plastic producers that depend heavily on US ethane, according to analytics firm Vortexa.
The trade war has hit both economies hard. China's factory activity slipped into its sharpest contraction since December 2023, an early sign of the strain from the tariffs.
Major banks including UBS Group and Goldman Sachs Group have cut their forecasts for China's full-year growth to around 4 per cent or lower – well below Beijing's official target of around 5 per cent.
Dr Wu Xinbo, director at Fudan University's Centre for American Studies in Shanghai, said while he could not confirm the exemptions, they would not be surprising.
'Tariffs are a kind of self-inflicted thing,' he said. 'And we want to control the damage as much as we can.' BLOOMBERG
Join ST's Telegram channel and get the latest breaking news delivered to you.
