China, U.S. agree to remove some tariffs ahead of trade deal

China and the United States have agreed to remove some tariffs they imposed on each other during their trade dispute.

AP’s Joe McDonald had the news:

Beijing and Washington have agreed to reduce some punitive tariffs on each other’s goods as talks on ending their trade war progress, a Chinese spokesman said Thursday, removing a possible stumbling block to a settlement.

The agreement came during talks aimed at working out details of a “Phase 1” deal announced Oct. 12. Financial markets were rattled by reports China was pushing for tariffs to be lifted, which raised the possibility of a breakdown in talks.

Negotiators agreed to a “phased cancellation” of tariff hikes if talks progress, said a Commerce Ministry spokesman, Gao Feng.

“If the two sides achieve a ‘Phase 1’ agreement, then based on the content of that agreement, tariffs already increased should be canceled at the same time and by the same rate,” Gao said at a news briefing.

As for the size of reductions, Gao said that would depend on the agreement.

Yawen Chen and Martin Pollard reported for Reuters that:

An interim U.S.-China trade deal is widely expected to include a U.S. pledge to scrap tariffs scheduled for Dec. 15 on about $156 billion worth of Chinese imports, including cell phones, laptop computers and toys.

Tariff cancellation was an important condition for any agreement, ministry spokesman Gao Feng said, adding that both must simultaneously cancel some tariffs on each other’s goods to reach a “phase one” trade deal.

“The trade war started with tariffs, and should end with the cancellation of tariffs,” Gao told a regular news briefing.

The proportion of tariffs cancelled for both sides to reach a “phase one” deal must be the same, but the number to be cancelled can be negotiated, he added, without elaborating.

Sam Meredith from CNBC noted:

Fresh hopes of a “phase one” trade agreement prompted U.S. stock index futures to rally Thursday morning, with Dow futures poised to open up more than 120 points.

Market participants had expected the two economic giants to sign a deal later this month, after both Washington and Beijing spoke of progress in talks late last week.

However, Reuters reported on Wednesday that a meeting between President Donald Trump and Chinese President Xi Jinping could be postponed until December — delaying a chance for the two leaders to sign an interim trade deal.

The world’s two largest economies have imposed tariffs on billions of dollars’ worth of one another’s goods since the start of 2018, battering financial markets and souring business and consumer sentiment.

The Trump administration has been putting increasing pressure on Beijing to curb massive subsidies to state-owned companies and stop the forced transfer of American technology to Chinese firms.

But, analysts are skeptical that a “phase one” trade deal will effectively tackle these issues, suggesting the two economic giants will need a more comprehensive agreement before market sentiment can be boosted sustainably.