China's Commerce Ministry says trade war should be ended by removing tariffs - CNBC

A Chinese and U.S. flag at a booth during the first China International Import Expo in Shanghai, taken on taken on November 6, 2018.

Johannes Eisele | AFP | Getty Images

BEIJING — China is still calling for the U.S. to roll back tariffs as part of any "phase one" agreement, as trade negotiations between the world's two largest economies drag on.

"The trade war was begun with adding tariffs, and should be ended by canceling these additional tariffs. This is an important condition for both sides to reach an agreement," China's Ministry of Commerce spokesperson Gao Feng said at a weekly press conference Thursday, according to a CNBC translation.

"If both sides reach a phase one agreement, the level of tariff rollback will fully reflect the importance of the phase one agreement," Gao said, noting the two countries' trade delegations are in deep consultations on this topic.

Trade tensions between the U.S. and China have persisted for well over a year, with each country levying tariffs on billions of dollars' worth of goods from the other. Now, both countries are in the process of sealing what's been called a "phase one" deal to address some points of disagreement. Chinese President Xi Jinping and U.S. President Donald Trump were expected to meet in mid-November at the Asia-Pacific Economic Cooperation summit in Santiago, but Chile canceled the event in late October due to domestic unrest.

Gao did not specifically address a comment from Trump last Friday that he had not agreed to remove tariffs on Chinese products. The Commerce Ministry spokesperson also did not directly comment on news reports that a challenge to reaching a trade agreement is China's unwillingness to put specific amounts of U.S. farm purchases into writing.

In the meantime, data and anecdotal evidence indicate businesses from both countries have tried different ways to cope with the tariffs. For some companies in America, diverting production or the sourcing of imports is an option.

"From a regional perspective, we've seen a massive increase in exports destined to the U.S. from markets like Vietnam and Taiwan," Nick Marro, global trade lead at The Economist Intelligence Unit, said in an email Thursday.

"It's unlikely either, however, that either economy has the existing production capacity to fully explain that story, indicating that trans-shipments may be playing a role," he said. "The biggest risk here is that this type of tariff evasion is illegal under U.S. trade law, and so some companies — and some countries — might be exposing themselves to the risk of punitive U.S. trade actions in response."

On the other hand, many Chinese companies have chosen to absorb what tariff costs they can, rather than pass it on to customers.

Product sales for both Chinese and American sellers on Amazon.com in the U.S. have grown despite the trade tensions, according to e-commerce data and software company SellerMotor. But while the average price for products sold by Chinese sellers has climbed 29% between Oct. 2017 and Oct. 2019, the price for products sold by American sellers went up 35% over the same period, the data showed.

The SellerMotor analysis tracked about 1 million products on Amazon.com in the U.S., half from American sellers, and the other half from Chinese sellers.

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