Freezing will hit: why the US decided to delay the increase in duties against China

America recognizes its dependence on Chinese products, so large duties against China are unprofitable for it, experts interviewed by Izvestia believe. On August 12, Washington re-froze increased import tariffs against Beijing for 90 days, which also put its high fee for the United States on hold. Analysts say that Donald Trump will probably postpone the duties once again in November, and this scenario will also be beneficial for Russia. Otherwise, there is a high probability of higher world prices and increased instability. For our country, this may threaten to reduce demand for Russian goods and weaken the ruble. Whether there is a possibility that tariffs against China will be abolished altogether is in the Izvestia article.

China and the United States extended the freeze on increased tariffs

On August 12, Donald Trump decided to re-freeze import tariffs against Beijing for 90 days. Initially, he announced the introduction of large-scale duties on April 2, the new measures affected 185 states. Later, he repeatedly postponed them.

As a result of the trade deals, rates for some countries were reduced, for example, for Japan from 25% to 15% and Indonesia from 32% to 19%. With the European Union, Trump agreed to reduce tariffs from 30% to 15%, and in return, the EU promised to abandon Russian oil and gas supplies and annually purchase $250 billion worth of energy from the United States during the three years of the American president's rule.

The toughest tariffs initially affected China: by April 11, they had increased to 145%. China, in turn, retaliated by imposing fees of 125%. In general, such heavy duties on the republic's products lasted about a month — the countries managed to reach an agreement, and on May 14, a "trade truce" for 90 days came into force.

On August 12, the "truce" with China came to an end, but Donald Trump postponed the tariff increase until November 9. He noted that all agreements with China remain the same.

The website of the Ministry of Commerce of the People's Republic of China clarified that Washington and Beijing jointly agreed to "once again postpone the implementation of 24 percent tariffs for another 90 days," starting on August 12. At the same time, the parties, as before, will maintain a 10% rate on each other's goods.

The United States understands that its economy is strongly linked to China's. The United States cannot impose favorable conditions on China, as they have done with other countries, said Olga Belenkaya, head of the Macroeconomic Analysis Department at Finam. She added that neither America nor China, having tried the option of harsh escalation, did not want to return to it.

In addition, Washington has extended the pause on increased tariffs on Chinese goods to avoid additional inflationary pressures and disruptions in supply chains in the midst of preparations for the Christmas season, said Sergey Potapov, senior analyst at BCS World Investments. Such a move is intended to preserve space for ongoing negotiations with Beijing, which relate to trade, agriculture and technological restrictions.

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The expert added: at the same time, the tariff package that entered into force on August 7 for other countries followed a separate schedule and was not tied to a dialogue with China, so the republic received an individual postponement.

In general, this will reduce volatility in the global economy in the short term — there will be less pressure on world markets and prices, says Anastasia Priklyova, Associate Professor of the Department of International Business at Plekhanov Russian University of Economics. According to her, individual companies could benefit by acting as intermediaries in transactions between US and Chinese enterprises, but in the future this will lead to higher world prices and increased instability.

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Now the American president is trying in every possible way to support the country's economy, which is why he introduced protective duties and began a new round of trade wars. Trump intends to replenish budget revenues by trying to at least partially finance the shortfall in tax revenues under the new financial plan, believes Olga Belenkaya from Finam. The US national debt has already exceeded the $37.2 trillion mark.

In addition, the US administration wants to stimulate domestic producers and force citizens to buy local goods rather than prefer imported goods.

Last year, the trade turnover between China and the United States amounted to $688 billion, an increase of 4%. As Izvestia reported earlier, it sank by 20% in April and amounted to $45.6 billion that month.

In the next three months, trade will continue pending a decision on tariffs. Postponing the introduction of fees will help avoid the collapse of bilateral trade, in which American consumers would inevitably face a sharp increase in prices for imported consumer goods from China, Olga Belenkaya from Finam said. She added: the return of ultra-high tariffs threatened to disrupt many production chains, as happened during the coronavirus pandemic.

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Will interest in Russian energy resources drop amid the large-scale imposition of duties

Moreover, Trump may postpone the duties again in November if further negotiations show progress, experts interviewed by Izvestia believe. According to Vladimir Chernov, analyst at Freedom Finance Global, the American leader probably will not impose tariffs against China in the amount he originally planned. This entails the risk of a global crisis. However, if negotiations reach an impasse, the risks of high fees will remain, he added.

How the trade war between America and China will affect the Russian Federation

Improving relations between China and the United States will have a dual impact on Russia. On the one hand, if China establishes ties with the United States, this may lead to a reduction in purchases of Russian products, in particular oil, in which case the Russian budget risks not receiving enough funds. This will lead to volatility in prices for raw materials, as well as reduce demand for our energy resources, says Sergey Potapov from BCS World Investments.

Although Brent quotes have regained some of their losses (as of August 12, the price for this brand was $66.2 per barrel), energy resources have fallen in price by a quarter since the beginning of the year. According to the updated plan of the Russian Ministry of Finance, the budget deficit is expected to reach 3.8 trillion rubles this year. However, in the first seven months of this year, it has already amounted to 4.9 trillion.

Trump is now threatening secondary tariffs to countries that buy Russian oil, including China, which could strain relations between the United States and China and indirectly hit Russia, isolating its economy, said Vladimir Chernov of Freedom Finance Global. According to him, if the postponement of the imposition of duties ends with an escalation of the trade conflict, then demand for Russian goods will decrease again due to the general instability in the world, as well as the ruble will weaken.

On the other hand, if China avoids high tariffs in the future, its economy can grow. This will increase China's demand for goods from Russia, as well as allow our country to buy cheaper products.