Washington: The US extended its trade truce with China for another 90 days on Monday (August 11), thereby delaying a dangerous showdown between the world’s two largest economies yet again.
US president Donald 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.”
The previous deadline was set to expire at 12.01 am 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.
Experts say that 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 Trump and Chinese president Xi Jinping. The move has been welcomed by US companies doing business with China.
“Securing an agreement on fentanyl that leads to a reduction in US tariffs and a rollback of China’s retaliatory measures is acutely needed to restart US agriculture and energy exports,” Sean Stein, president of the US-China Business Council has said.
The extension is “critical” to give the two governments time to negotiate a trade agreement that US businesses hope would improve their market access in China and provide the certainty needed for companies to make medium- and long-term plans, Stein believes.
Even the European Union and Japan have accepted, what was once unthinkable, tariffs of 15% on exports to the US. India is facing a tariff of 50%. However, the Trump administration seems to be dragging its feet on a trade pact with China, fearing a retaliatory imposition of tariff on US goods.
Observers say that Trump’s trade policies have turned the US from one of the most open economies in the world into a protectionist fortress. According to the Budget Lab at Yale University. The average US tariff has gone from around 2.5% at the start of the year to 18.6%, the highest since 1933.
China has a major bargaining chip. It can threaten to cut-off or at least slow down the export of rare earths minerals and magnets to the US that are so vital for nearly everything – from electric vehicles to jet engines.
In May, the US and China had averted an economic catastrophe by reducing massive tariffs they had slapped on each other’s products, which had reached as high as 145% against China and 125% against the US.
In June, the two countries reached an agreement to ease tensions. The United States 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.
