China Cuts Tariffs on $75 Billion Worth of U.S. Goods, Stock Markets Rally in Response

UTC by Tolu Ajiboye · 3 min read
China Cuts Tariffs on $75 Billion Worth of U.S. Goods, Stock Markets Rally in Response
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China has announced that next week, it will cut tariffs on US goods by half. Stocks in China, as well as in other countries, have reacted positively to this statement.

On Thursday, China said it will cut down tariffs on more than a few U.S. goods. Chinese authorities announced it will reduce tariffs placed on these goods worth $75 billion by 50%.

China Cuts Tariffs as Trade Tensions Improve

China had initially announced tariffs on these goods on Sept. 1. 2019. The tariffs were in retaliation to an announcement earlier made by the U.S. on Chinese goods, in the heat of the trade war between both countries. Now that Phase One of a deal between both countries has been reached, the tensions are easing up.

According to a statement from the ministry of finance in China the tariffs will now be cut in half. Some goods will see a cut to 5% from 10% while others will be cut to 2.5% from 5%. The statement also says that the new tariffs will take effect on the 14th of February at exactly 1:01 pm. It, however, does not include any time zones.

The statement also specifies that the new development was done to further the chances of a proper trade relationship between the U.S. and China. The U.S. has also decided 2 cut tariffs on Chinese goods. Similarly, the decision from the U.S. will take effect on the 14th of February and will see 50% cuts as well, from 15% to 7.5%. However, this time, the Chinese goods in question are worth $120 billion.

China has also announced that it is suspending these tariffs on all U.S. products that can help with the coronavirus in China.

The willingness of both countries to move forward with a possible trade deal is a breath of fresh air to both their economies. Also, it is advantageous to a few other countries and businesses that have ties with the economic situation in both the U.S. and China. While the trade war raged on, there were many predictions about hard times for several businesses and a possible deterioration into a global recession.

 Stocks Rise in Response to China Tariff Cuts

In response to news of tariff cuts, stock markets in many parts of the world began to rise. Stocks in mainland China jumped over 2% shortly after the announcement. A similar spike was also seen in stock markets in Hong Kong. Also, Japan was not left out as shares jumped almost 3%.

In Europe, the STOXX 600 index hit a new record high after climbing 0.4%. Similar gains from 0.3% to 0.7% were also noticed in several indexes in London, Frankfurt, and Paris. The Chinese yuan also gained offshore to 6.9652 and onshore to 6.9648.

Speaking on the new development, the chief investment officer at Jevons Global, Kingsley Jones, praised the decision. Jones said:

“I think that would be good… If we can get these tariff barriers lowered, and get a normalization of relations that also includes some negotiation about those other sticking points… then I think that’s very positive.”

The new development is some good news in a somewhat dampened market caused by the spread of the deadly coronavirus.

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Tolu Ajiboye
Author Tolu Ajiboye

Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge. When he's not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.

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