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TWN
Info Service on WTO and Trade Issues (May25/17) Yerevan, 13 May (D. Ravi Kanth) — The United States and China on 12 May in Geneva announced a temporary ceasefire in their heightened tariff and trade war, agreeing to slash their respective tariffs by 115% following the Trump administration’s imposition of tariffs against China and other countries over the past 90 days. China had retaliated against each tariff measure imposed by the Trump administration that unleashed a global tariff and trade war following US President Donald Trump’s announcement of “reciprocal” tariffs on 2 April, while Washington’s other trading partners seem to be engaged in various stages of negotiations over these tariffs. Last week, the US and the United Kingdom struck a trade agreement which still has several issues to be resolved. “We have reached an agreement on a 90-day pause, and substantially move down the tariff levels,” said US Treasury Secretary Scott Bessent at a press conference in Geneva on 12 May, emphasizing that “both sides, on the reciprocal tariffs, will move their tariffs down 115%.” China stuck to its position that the trade war was started by the US. “Over the past three months or so, the global trade war, which was provoked or initiated by the United States, has caught global attention,” Chinese Vice Premier and chief negotiator Mr He Lifeng told reporters in Geneva on 12 May. “China’s position towards this trade war has been clear and consistent, and that is China doesn’t want to fight a trade war because trade wars produce no winners. But if the US insists on forcing this war upon us, China will not be afraid of it, and will fight to the end,” the Chinese chief negotiator insisted. During the period from 1 February to 9 April, the US chose to unilaterally impose different levels of tariffs against countries in alleged violation of its multilateral tariff commitments as inscribed in the schedules of concessions under Article II of the GATT, which was replaced by the World Trade Organization in 1995. After weeks of “saber-rattling” by the Trump administration, particularly against China, it has reached a temporary/partial agreement with China after two days of intense negotiations in Geneva. The two sides temporarily paused all tariffs that came into effect after the Trump administration announced the “reciprocal” tariffs on 2 April, and the subsequent escalation of tariffs to 145% against China. Beijing, in turn, chose to retaliate in an equal measure by imposing an overall import duty of 125% on American goods entering the Chinese market. According to media reports, the US will now lower the 145% tariff against China to 30%, while China will lower its tariff of 125% on US goods to 10%. The US has also agreed to reduce its “reciprocal” tariff of 34% to 10%, while China also did the same with its retaliatory tariff of 34% on American goods. THE AGREEMENT The bilateral agreement between the US and China, which is expected to be reviewed in various international capitals, seems to have brought about a positive turn in lowering the tariff and trade tensions for the time being, said people familiar with the development. The preamble to the agreement notes the “importance of a sustainable, long-term, and mutually beneficial economic and trade relationship,” while suggesting that “continued discussions have the potential to address the concerns of each side in their economic and trade relationship.” Significantly, the two sides agreed to set up a new mechanism to continue discussions about economic and trade relations, “in the spirit of mutual opening, continued communication, cooperation, and mutual respect.” According to a Joint Statement on US-China Economic and Trade Meeting issued by the White House on 12 May, the United States “will (i) modify the application of the additional ad valorem rate of duty on articles of China (including articles of the Hong Kong Special Administrative Region and the Macau Special Administrative Region) set forth in Executive Order 14257 of April 2, 2025, by suspending 24 percentage points of that rate for an initial period of 90 days, while retaining the remaining ad valorem rate of 10 percent on those articles pursuant to the terms of said Order; and (ii) removing the modified additional ad valorem rates of duty on those articles imposed by Executive Order 14259 of April 8, 2025 and Executive Order 14266 of April 9, 2025.” According to the Joint Statement, China “will (i) modify accordingly the application of the additional ad valorem rate of duty on articles of the United States set forth in Announcement of the Customs Tariff Commission of the State Council No. 4 of 2025, by suspending 24 percentage points of that rate for an initial period of 90 days, while retaining the remaining additional ad valorem rate of 10 percent on those articles, and removing the modified additional ad valorem rates of duty on those articles imposed by Announcement of the Customs Tariff Commission of the State Council No. 5 of 2025 and Announcement of the Customs Tariff Commission of the State Council No. 6 of 2025; and (ii) adopt all necessary administrative measures to suspend or remove the non- tariff countermeasures taken against the United States since April 2, 2025.” Both sides also agreed to “establish a mechanism to continue discussions about economic and trade relations.” The understanding reached on the “mechanism” suggests that the representative from the Chinese side for these discussions will be He Lifeng, Vice Premier of the State Council, and two representatives from the Chinese finance and commerce ministries, while the US side will be represented by Scott Bessent, Secretary of the Treasury, and Jamieson Greer, United States Trade Representative (USTR). The two sides agreed to conduct discussions “alternately in China and the United States, or a third country upon agreement of the Parties.” “As required, the two sides may conduct working-level consultations on relevant economic and trade issues.” The fentanyl-related tariff of 20% will continue until China acts appropriately, including punishing those responsible for the illegal supplies of the opioid drug entering the US, while the US is also seemingly committed to taking punitive measures against narcotic “mafias” in the coming days, remarks by Treasury Secretary Bessent have suggested. At the press conference in Geneva, Bessent gave an account of the preparations for the Geneva meeting, suggesting that “both countries represented their national interest very well.” More importantly, Bessent said the US “concluded that we have [a] shared interest, and we both have an interest in balanced trade. The US will continue moving towards that,” including assurances that the two sides will not “de-couple” in their bilateral trade. As previously reported in the Wall Street Journal, the US Treasury Secretary had sought commitments from several trading partners that they will not trade with China while allegedly opting for isolating China in the supply chains. When Bessent asked the USTR to present a background to President Trump’s imposition of tariffs, including “reciprocal” tariffs, Ambassador Greer said that “the atmosphere of the meeting was candid, in-depth, and constructive,” emphasizing that “the meeting achieved substantial progress and reached important consensus.” “The two sides agreed on establishing a consultation mechanism for trade and economic issues, and identify the lead persons on each side and we’ll carry on further consultations relating to trade and economic issues of their respective concerns,” Ambassador Greer said. “The rapid nature that we were able to conduct and conclude these discussions is a testament to mutual understanding and mutual respect between the Chinese and US sides,” the USTR said. The USTR drew attention to the ballooning US trade deficit of $1.2 trillion in goods at the end of last year, which was an approximately 42% increase over the few years prior, when it was $850 billion. The reason for this huge jump in the trade deficit was largely due to “non-reciprocal trade, among other things,” said Ambassador Greer, adding that the net result of the uncontrollable US trade deficit “has been offshoring of manufacturing and other negative impacts on the US economy.” Justifying President Trump’s “America First Trade Policy” announced on 20 January, and the subsequent imposition of “reciprocal” tariffs in April, Ambassador Greer said that “there was a global baseline tariff accompanied by higher reciprocal tariffs for each country depending on the level and intensity of their trade surplus with the United States.” Noting that China was assigned a reciprocal tariff rate of 34% on all its goods entering the US market, the USTR acknowledged that “China was the only country that chose to implement retaliation against the United States for this reciprocal tariff” and that all other countries withheld and decided that they wanted to negotiate with the United States or simply not retaliate. “And so we’ve been in a detailed discussion with other countries for several weeks at this point,” he said. He continued, “China, as you know, retaliated not only with tariffs, but with disproportionate and asymmetrical non-tariff measures.” If the US did not impose unilateral tariffs, especially “reciprocal” tariffs, China would not have retaliated at all, said a person, who asked not to be quoted. “In order to maintain the effectiveness of the reciprocal tariff measures,” the USTR said that “the president increased our tariff rates to offset Chinese retaliation, and as you know, this escalated to a point where both sides had added 125% tariffs, and with the Chinese side additional non-tariff measures, amounting to an embargo in some senses on trade, an effective embargo, which of course was not a sustainable practice for either side.” He said that “with this agreement, we come to an agreement that our reciprocal tariff rate will go down to 10% on the United States side, so it goes down 115%. We enter into a 90-day pause period for negotiations, which both the Chinese and the United States are very committed to.” The US Treasury Secretary said the US has a “process, plan, and mechanism”, which are “big takeaways from this weekend.” The United States, said Bessent, “will continue a strategic re-balancing in many areas that were exposed as supply chain weaknesses during COVID.” He said that Washington has identified “five or six strategic industries and supply chain vulnerabilities,” while emphasizing that it “will continue moving toward US independence or reliable supplies from allies on those, but the consensus from both delegations this weekend is neither side wants a decoupling.” Asked why the US went down to a 30% tariff against China, the USTR replied that Washington will “retain our 10% global baseline tariff, which we have on other countries,” in addition to that, “previous measures that we’ve retained, which have been, frankly, effective in reducing the US bilateral trade deficit with China over the past few years.” Further, the USTR clarified that the agreement “does not include any sector-specific tariffs that have been put across all of our trading partners.” The “upside surprise,” said Bessent, “for me from this weekend was the level of Chinese engagement on the fentanyl crisis in the United States.” He said that the US and China “concluded that we had shared interest and that neither side was interested in a decoupling and again a lot of back-and-forth on various differences in views on fair trade.” Bessent insisted that trade deficits are a result of three things: terms of trade, currency manipulation, and US fiscal position. The US informed China that the “Trump administration is working very hard on containing this out-of-control fiscal deficit that we inherited from the previous administration.” However, the two sides did not discuss the currency issue. When asked whether it would have been better to start a discussion with China before imposing tariffs, the USTR appeared to strike a hardline stance. Ambassador Greer said, “I disagree entirely,” adding that “we have spent decades at the World Trade Organization in multilateral and bilateral negotiations trying to get other countries to reduce their tariffs and non-tariff barriers to be more reciprocal with the US”, which has been one of the most open economies for decades. “The promise of the WTO and the multilateral system is that everyone was going to come down [in terms of tariffs and non-tariff barriers],” said Ambassador Greer. “It turns out the US went down significantly.” CHINA STANDS FIRM China said its position “towards this trade war has been clear and consistent, and that is China doesn’t want to fight a trade war because trade wars produce no winners. But if the US insists on forcing this war upon us, China will not be afraid of it, and will fight to the end.” Expressing satisfaction, the Chinese Vice Premier He Lifeng said, “thanks to the concerted efforts from both sides, the meeting has been productive and has been an important first step taken by the two sides to properly resolve their differences through equal-footed dialogue, and also for bridging differences and deepening cooperation. This meeting has laid the foundation and created the conditions for that effort.” China drove home the message that “the key is to follow the principle of mutual respect, peaceful coexistence, and win-win cooperation, and find ways to properly resolve issues through equal-footed dialogue and consultation in order to foster a stable, sound, and sustainable China-US trade and economic relationship.” Vice Premier He said “we’re going to promote new development in the China-US trade and economic relations, and inject more certainty and stability into the world economy.” +
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