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China And The United States Have Lowered Tariffs! The Problem Of Small Packages Is Still Unresolved
On May 12, the Sino US Geneva Economic and Trade Talks issued a joint statement. The statement states:
The United States will (1) amend the ad valorem tariffs imposed on Chinese goods (including goods from Hong Kong Special Administrative Region and Macao Special Administrative Region) as stipulated in Executive Order No. 14257 of April 2, 2025, of which 24% tariffs will be suspended within the initial 90 days, while retaining the remaining 10% tariffs imposed on these goods as stipulated in the Executive Order; （2） The additional tariff levied on these goods according to Executive Order No. 14259 of April 8, 2025 and Executive Order No. 14266 of April 9, 2025 will be cancelled.
China will (1) correspondingly revise the ad valorem tariffs on American goods stipulated in the No. 4 Notice of the Tax Commission in 2025, in which 24% of the tariffs will be suspended within the initial 90 days, while retaining the remaining 10% of the tariffs on these goods, and cancel the additional tariffs on these goods according to the No. 5 and No. 6 Notice of the Tax Commission in 2025; （2） Take necessary measures to suspend or cancel non-tariff countermeasures against the United States from April 2, 2025.
It can be seen that the Joint Statement is a step towards the elimination of unilateral tariffs that are not in line with WTO rules. For 125% of the so-called equivalent tariff and escalation tariff of the US side and 125% of the comprehensive reciprocal countervailing tariff of the Chinese side, the two sides simultaneously cancelled up to 91% of the tariff, suspended 24% of the tariff within 90 days, and retained 10% of the tariff respectively. Compared with the previous, the two sides have reduced their tariffs by 115%, which is a huge amount. These measures have cooled the Sino US economic and trade frictions and played a positive role in the stability of the world economy and the Sino US economic and trade relations.
If you want to ask "what is the actual level of tariffs on China in Trump's second term", it can be said that it is about 30%, because the 10% tariffs imposed on February 1 and March 3 respectively are not involved. However, in fact, there are some earlier tariff measures, which vary from product, industry, level and other factors, so it is difficult to give a clear total number.
Liu Dian, associate researcher of the Institute of Chinese Studies of Fudan University, pointed out that the Sino US economic and trade team met in Geneva and reached a package agreement covering tariff reduction, suspension of countermeasures, initiation of the negotiation mechanism, etc., reflecting the intention of the two sides to seek a window of relaxation under a high-pressure situation. The reciprocal tax reduction arrangement not only helps to ease short-term tensions, but also lays the foundation for subsequent institutional consultations.
The statement said that the two sides will establish a "normalized consultation mechanism", and the future consultations are expected to cover issues such as sudden friction response, mutual recognition of technology, and rule coordination, marking the transition of China US economic and trade communication from "case response" to "mechanism management". Against the background of high global uncertainty, this will help reduce the risk of decoupling and stabilize medium - and long-term expectations.
Song Guoyou, deputy director of the American Research Center of Fudan University, said that from the statement, the results of the talks exceeded expectations and were "substantive", reflecting China's previous positive results against the United States. This tariff is much lower than before. In fact, the United States has only imposed a benchmark tariff of 10% similar to that of most countries on China, which is conducive to the normalization of Sino US trade. However, the United States still retains unfair unilateral tariffs on China, which need to be dealt with in the subsequent Sino US talks.
Huang Zhengliang, director of the New Industrialization Research Center of the Industrial Economy Research Institute of the Center for International Economic and Technological Cooperation of the Ministry of Industry and Information Technology, said that the first negotiation between China and the United States was to significantly reduce tariffs, and the two sides reached a consultation mechanism, which was obviously higher than the market expectations. Huang Zhengliang specifically mentioned that the US side has more pressure than the Chinese side. In the middle of May, the United States will release a number of economic indicators such as prices, manufacturing, and import prices, which will superimpose the consumption of American products' inventory. High tariffs will increase the pressure on the U.S. economy. The United States needs to reduce tariffs in a timely manner, resume trade, and reduce the pressure on economic development and commodity inventory.
The recovery of small package tax exemption, which is concerned by enterprises in the textile and clothing industry, was not mentioned in the Sino US joint statement. On the previous May 2, the US government terminated the "small exemption" policy of "allowing packages ordered from China to enter the United States duty-free for less than $800", and imposed a 120% tariff on such packages.
The reduction or exemption of small package tax is related to the livelihood of cross-border e-commerce groups. Although the "prospect is not clear", in the view of trade experts, logically speaking, if other goods have tariff reduction and exemption policies, it should be mapped to small amount exemption, because it accounts for a considerable proportion of goods imported from China to the United States.
Therefore, in the future, we need to focus on how the two sides can implement the details at the working group level during the 90 day suspension period, such as how to deal with the small package tax, and whether we can conduct in-depth negotiations on some structural issues. At the same time, we should also see that the structural contradictions between China and the United States still exist, and trade easing does not mean the end of the problem. The economic and trade frictions between China and the United States have gone beyond traditional tariff disputes. The current contradictions focus on structural issues such as technical security, industrial subsidies, and supply chain dominance, which are highly strategic and long-term.
This detente is more likely to be a strategic one. The two sides may reach a "functional consensus" in some areas, but the competition around core interests will continue. It is suggested to maintain a cautious and optimistic attitude, and be soberly aware that the evolution of China US relations will be a long-term game and a process of repeated tugs and zags, which cannot be completely solved through a single agreement.
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