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China has said it would halve additional tariffs levied against 1,717 US goods last year, in a move that has boosted markets in Asia that have been under pressure since the start of the coronavirus outbreak.
The products benefiting are part of $75bn of goods on which China imposed tariffs worth between 5% and 10% in September as part of a tit-for-tat trade war with the Trump administration.
Analysts said that the tariff cut is partly a move by Beijing to boost confidence amid an outbreak that has disrupted businesses in China’s core manufacturing regions and hit investor sentiment. 560 deaths had been reported so far on Thursday morning in China.
And the reaction was strong on Asian markets, with the CSI 300 index, which measures the biggest stocks on Shanghai and Shenzhen exchanges, rising by 1.86%. The Shanghai Stock Exchange Composite index rose by 1.72%, stocks in Hong Kong rose by 2.4%, and the Japanese Topix index gained 2%.
The tariff cuts, that will come into effect on 14 February, Valentine’s Day, come after the signing of a Phase 1 trade deal that brought a truce to a bruising trade war between the world’s two largest economies.
Analysts at Deutsche Bank led by Craig Nicol said:
It shouldn’t be surprising news as this comes after both nations had agreed in Phase 1 negotiations that they would reduce tariffs on each other’s goods as part of the deal
Deutsche Bank’s forecasters predict Chinese GDP growth will be 5.8% this year, 0.3 percentage points lower than previously forecast. The virus will also knock 0.2 percentage points off global GDP this year, they estimate.
Elsewhere, German factory orders slumped much more than expected in December.
Data published this morning showed that orders declined by 2.1%, compared to the 0.6% rise expected by economists. And of course this is before the effects of the coronavirus outbreak, which is almost certain to dent the profits of major exporters such as Germany’s premium carmakers who sell a large proportion of their products to China.
The implications are not pretty for carmakers anywhere, in fact. For instance, it comes at just the wrong time for struggling Aston Martin, even after a bailout deal was agreed…
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