China exempts some goods from US tariffs to limit trade war pain

China has exempted some US imports from its 125% tariffs and is asking firms to identify critical goods they need levy-free, according to businesses notified, in the clearest sign yet of Beijing’s concerns about the trade war’s economic fallout. The dispensation, which follows de-escalatory statements from Washington, signals that the world’s two largest economies were prepared to rein in their conflict, which had frozen much of the trade between them, raising fears of a global recession.

Beijing’s exemptions - which business groups hope would extend to dozens of industries - pushed the US dollar up slightly and lifted equity markets in Hong Kong and Japan.

“As a quid-pro-quo move, it could provide a potential way to de-escalate tensions,” said Alfredo Montufar-Helu, a senior adviser to the Conference Board’s China centre, a think tank.

But, he cautioned: “It’s clear that neither the US nor China want to be the first in reaching out for a deal.” China has not yet communicated publicly on any exemptions. A Friday statement by the Politburo, the Communist Party’s elite decision-making body, focused on efforts to maintain stability at home by supporting firms and workers most affected by tariffs.

The readout, which followed the Politburo’s regular monthly meeting, showed that Beijing was also ready to hunker down and fight a trade war of attrition if needed to outlast Washington in enduring the pain from the breakdown of their relationship.

A Ministry of Commerce taskforce is collecting lists of items that could be exempted from tariffs and is asking companies to submit their own requests, according to a person with knowledge of that outreach.

The ministry said on Thursday it had held a meeting with more than 80 foreign companies and business chambers in China to discuss the impact of US tariffs on investment and the operation of foreign firms in the country.

“The Chinese government, for example, has been asking our companies what sort of things are you importing to China from the US that you cannot find anywhere else and so would shut down your supply chain,” American Chamber of Commerce in China President Michael Hart said.

Hart added some member pharmaceutical companies had reported being able to import drugs to China without tariffs. He believed the exemptions were drug-specific, not industry-wide.

The chief executive of French aircraft engine maker Safran said on Friday it had been informed last night that China had granted tariff exemptions on “a certain number of aerospace equipment parts” including engines and landing gear.

The tariff exemptions under consideration by Beijing could provide cost relief for companies in China and take pressure off US exports at a time when the Trump administration has shown signs of wanting to make a deal with Beijing.

The European Union Chamber of Commerce in China also said it had raised the issue of tariff exemptions with the commerce ministry and was awaiting a response.

“Many of our member companies are significantly impacted by the tariffs on critical components imported from the US,” President Jens Eskelund said.

A list of 131 categories of products said to be under consideration for tariff exemptions was circulating on Chinese social media platforms and among some businesses and trade groups on Friday. Reuters could not verify the list, which included items ranging from vaccines and chemicals to jet engines.

Huatai Securities said the list corresponded to $45 billion worth of imports to China last year.

China’s customs agency and Ministry of Commerce did not reply to requests for comment. China’s foreign ministry said it was not familiar with tariff exemption plans, redirecting queries to “relevant authorities”.

LASTING FIGHT While Washington has said the trade stand-off with China is economically untenable and already offered tariff exemptions to some electronic goods, China has repeatedly said it is willing to fight to the end unless the US lifts its 145% tariffs.

But China’s economy headed into the trade war with rising unemployment, deflationary pressures and heightened concern that a mounting backlog of unsold exports could drive domestic prices even lower.

While China ran a trillion-dollar trade surplus in 2024, it also relies on the United States for key imports, including the petrochemical ethane needed to make plastics, and some drugs.

Big pharmaceutical companies including AstraZeneca and GSK have at least one manufacturing site in the US for drugs sold in China, according to Chinese government data.

Major ethane processors have already sought tariff waivers from Beijing because the US is the only supplier.

Exemptions may be only a tiny step in a long process.

“For those U.S.-manufactured goods that cannot be procured from any other country, I do think there is an interest to exempt them of import tariffs, even if this is done unilaterally,” Montufar-Helu said.

“But for some other goods like energy and agricultural commodities, I think the calculation is very different given that there are other sources that China can tap.”

Reuters