Region/Countries: Asia, China Industry: Multiple Sectors Date: December 2019

Why this is important to Wisconsin businesses: The changes apply to more than 850 product categories.

Tariffs remain a hot topic when it comes to doing business in China. According to China’s Ministry of Finance, during the first 11 months of 2019, total tariffs reached ¥263.8 trillion ($37.7 trillion), down 2.2% from a year earlier.

The guideline jointly released in November by the Communist Party of China Central Committee and the State Council stated that China would continue to expand imports and lower tariffs. Recently, the Customs Tariff Commission of the State Council said on its website that temporary tariff rates may apply to more than 850 types of imported goods, to bring them lower than the tariff rates for most-favored-nation (MFN) status, as a measure to increase imports and optimize the import structure. This adjustment and another adjustment which will be released on July 1, 2020 show China will continue to lower its tariffs and pursue polices of opening its economy.

Starting Jan. 1, China will implement provisional import tariff rates that are lower than the MFN tariff rates for more than 850 products. These new adjustments involve significant tariff cuts and cover a wide range of commodities, from everyday consumer goods to high-end technologies. For example, the tariff rate for frozen pork is temporarily reduced from 12% to 8%. The rate for some raw materials of medicines for asthma and diabetes has been lowered to zero. Tariffs on some high-tech components, including semiconductor testing and sorting equipment and parts for automobile transmissions, have been temporarily cut to strengthen such sectors as integrated circuit, aerospace, automobile and telecommunications production. For example, the tariff rate for aircraft autopilot parts has been cut from 5% to 1%. Lower tariffs have also been placed on more than 150 types of wood and paper products as an incentive for businesses to import these products. On average, the tariff rate for these types of products has been cut from 5.3% to 3.2%.

Starting July 1, China will roll out a fifth tariff reduction based on the Information Technology Agreement that was reached by 24 World Trade Organization members, including the U.S. and China. Under the agreement, tariffs on some information technology products will be gradually eliminated, and as part of this transition, tariff rates on 176 different types of information technology products are being reduced. These products are mostly high-end technology products, such as telecommunications products, semiconductor equipment, audio and video products, and medical equipment.

Although the cut on tariffs will cause a decrease in tariff income for the Chinese government, it will also energize the market and promote high-quality trade development. The pattern of policies favoring the business development of foreign companies in China is expected to continue.