Economic Impact of Feb 14 Sino-US Tariff Cuts Expected to be Positive 

February 9, 2020 Updated: February 9, 2020
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News Analysis

The economic impacts from the first Sino-U.S. tariff cuts scheduled for Feb. 14 are expected to be positive for China and the United States, despite the continuing coronavirus outbreak, according to one expert.

The Chinese regime has directed manufacturing facilities to begin reopening on Feb. 10 in order to benefit from the Sino-U.S. trade war truce tariff reductions scheduled for Feb. 14. Although Epoch Times business contacts report that about half of employees at major Chinese manufacturing facilities have still not returned, the growing supply chain parts shortage is expected to generate a big economic boost.

China’s Finance Ministry announced that the retaliatory 5 percent and 10 percent tariffs slapped on 1,717 U.S. goods in September would be cut by half on Feb. 14 in concert with the U.S. agreement to halve tariffs on many Chinese imports from 15 percent to 7.5 percent. The ministry stated: “China will adjust its measures at the same time to alleviate economic and trade frictions and expand economic and trade co-operation.” The ministry trumpeted that the move would “boost market confidence, promote bilateral relations and help global economic growth.”

Although there will be challenges ramping back up trade due to the coronavirus outbreak, China manufacturing expert James Pinto told The Epoch Times that global supply chain parts availability is getting seriously depleted, especially in the automotive and electronics sectors.

Pinto said that during the SARS outbreak in November 2002, foreign firms flew in their own doctors and quarantined workers in company dormitories; versus the current coronavirus outbreak happened during the Chinese New Year with about half of large factory workforces already headed home to rural communities.

All Chinese workers are being paid during the Lunar New Year holiday and the government imposed extended week of vacation due to the coronavirus. But Pinto expects a production mini-boom with Chinese factories so desperate to fill customer orders they will offer workers overtime to lure them back from the countryside.

Despite analyst doubts regarding China honoring its trade war truce commitment to increase imports from the United States by $200 billion, Pinto believes that it is in the Chinese Communist Party’s interest to promote stability in the short-run. But he warns that as the infrastructure is built out over the next two years in lower-cost labor venues such as Vietnam, multi-national manufacturers will leave China in droves.

Geopolitical Partners commented that China over the last two years sought to offset trade losses from the trade war by heavily investing to expand trade across its “One Belt, One Road” (OBOR, also known as Belt and Road Initiative). China now accounts for almost 36 percent of Russian exports, and about 20 percent of exports from its Central Asian neighbors including Kazakhstan, Uzbekistan, Turkmenistan, Tajikistan and Kyrgyzstan; while China is the largest supplier of component parts widely used in their domestic industrial and energy sectors.

It is important to China’s economic future to preserve these trade relationships, despite the continuing coronavirus outbreak. The World Health Organization’s Executive Board finished its five-day EB146 review of regional matters on Feb. 7 by praising the level of response by China to the coronavirus outbreak. But the WHO then asked its members for $675 million in emergency funding to prevent a global coronavirus pandemic.