US President Donald Trump has signed an executive order extending by 90 days the US’s tariff truce with China, removing the risk of an immediate escalation hours before the ceasefire was set to expire, but leaving trade relations fragile.
In the order released Monday night, Trump said that he took the action because Beijing had taken “significant steps” towards “remedying non-reciprocal trade arrangements and addressing the concerns of the United States relating to economic and national security matters”.
The new deadline, according to the order, would be 12am Eastern time on November 10, and the current 10 per cent “reciprocal” tariff on Chinese imports would continue to be in effect until then.
“The United States continues to have discussions with the PRC to address the lack of trade reciprocity in our economic relationship and our resulting national and economic security concerns,” the order said.
In a statement on Tuesday, China’s Ministry of Commerce confirmed that both sides had agreed to extend the tariff truce for another 90 days from August 12, with the remaining 10 per cent tariff still in place.
China will adopt or maintain all necessary administrative measures to suspend or remove the non-tariff countermeasures taken against the US as agreed in the Geneva Joint Statement, the ministry added.
If the Tuesday deadline was not extended, US duties on Chinese imports would have climbed back to their levels in April, at the height of the tariff war between the world’s two largest trading nations.
The decision follows two weeks of speculation and mixed signals from Washington, after negotiators from China and the US concluded trade talks in Stockholm, Sweden, last month.
After the talks, Chinese negotiators declared a consensus for an extension of the pause on tariff increases, while the American side insisted that no deal would be final without Trump’s explicit approval.
Both sides were expected to extend the tariff truce by another three months following the talks, sources told the Post before discussions began.
The two nations would avoid imposing additional tariffs or escalating the trade war by other means during the extension, one source said.
Sean Stein, president of the US-China Business Council, said in a statement on Tuesday that the US business community “welcomes the decision”.
“The extension is critical to give the two governments time to negotiate an agreement that improves US market access in China, addresses the bilateral trade imbalance, and provides the certainty needed for companies to make medium- and long-term plans,” Stein said.
“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.”
Just ahead of the tariff truce deadline, Trump urged China to quadruple its purchases of American soybeans – a major export to China.
“China is worried about its shortage of soybeans. Our great farmers produce the most robust soybeans,” he said in a social media post late on Sunday.
“I hope China will quickly quadruple its soybean orders. This is also a way of substantially reducing China’s Trade Deficit with the USA. Rapid service will be provided. Thank you President XI,” Trump added.
China’s soybean imports from the US plunged by 27.8 per cent to US$2.08 billion in the second quarter as the US-China trade war intensified, from US$2.89 billion a year prior, according to Chinese customs data.
In terms of volume, China’s soybean imports from the US dropped by 8.7 per cent from 5.02 million metric tonnes in the same period last year to 4.58 million metric tonnes.
On Sunday, US Vice-President J.D. Vance told the media that Trump is “thinking” about slapping new tariffs on imports from China in response to the country’s purchases of Russian oil.
Malaysian Prime Minister Anwar Ibrahim said on Friday that President Xi Jinping was expected to attend an Asean summit to be held in Kuala Lumpur in October, potentially turning the annual talks into a stage for a high-stakes meeting between the leaders of the world’s two largest superpowers.
Trump said last week that the two leaders could have a meeting “before the end of the year” if both sides can come to a trade deal.
Since April, the US has gradually increased tariffs on Chinese imports to as much as 145 per cent. In retaliation, Beijing imposed tariffs of up to 125 per cent and introduced export controls on strategic raw materials. In May, both sides agreed in Geneva to a 90-day suspension of new tariffs.
After a similar meeting in London in June, Beijing accelerated the approvals for exports of rare earth minerals to the US, while Washington resumed reviewing licence applications for shipments of Nvidia’s H20 artificial intelligence (AI) chips to China.
Still, several hurdles continue to hinder prospects of improved China-US trade ties, including Washington’s deal with Vietnam aimed at curbing Chinese transshipments, along with the US’ new AI action plan that keeps tight technology restrictions on China in place.
Meanwhile, Washington is expected to press Beijing for “large purchases” of US goods to narrow the trade deficit, even as customs data show Chinese imports of many American commodities have plunged – or in some cases, stopped entirely – in recent months.
Some analysts say that Beijing sees itself as having the upper hand in negotiations, despite Trump’s delayed approval following the Stockholm meetings and push for more soybean orders.
“China believes that its control over rare earth mineral export remains a strong leverage against the US in the ongoing trade negotiations,” said William Yang, a senior analyst for northeast Asia at the International Crisis Group, adding that Beijing would continue to use its pull to secure further extensions or pressure the US to make concessions without making any of its own.
Wendy Cutler, a vice-president at the Asia Society Policy Institute, said that compared to the last major trade negotiation between the two countries – which culminated in a phase-one trade deal in 2020 – Beijing comes to the table with “much more negotiating leverage” and will “undoubtedly” use it to ask the US to relax its export controls on chips and chip equipment.
David Meale, who leads the China practice at the Eurasia Group, stressed that both sides have significant leverage.
“The US has many cards to play as well, evident in how it imposed export controls on advanced chips and other goods after China retaliated with higher tariffs after the US levies announced” in April, he said.
Meale, a former US diplomat, added that Trump’s delay in confirming the extension and his last-minute messaging about soybean imports suggest “a desire to wring all possible leverage out of the process”. - SOUTH CHINA MORNING POST
