China has begun exempting certain US imports—such as drugs, jet engines, and chemicals—from its 125% tariffs.
The move aims to reduce the economic strain of the trade war and keep supply chains intact.
Companies have been asked to identify essential goods they need tariff-free, according to notifications received by businesses.
The exemptions come after recent conciliatory signals from Washington.
Together, these developments suggest both countries may be cautiously exploring ways to reduce tensions that have disrupted trade and raised recession concerns.
Markets responded positively. The US dollar edged up, and stocks rose 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, senior adviser at the Conference Board’s China Center.
But he added, “It’s clear that neither the US nor China want to be the first in reaching out for a deal.”
However, a Friday meeting of China’s Politburo emphasised the need to stabilize the economy by supporting businesses and workers affected by tariffs.
The readout suggested that China is ready for a prolonged trade fight if needed.
A task force at the Ministry of Commerce is collecting lists of critical US goods that could be exempted from tariffs.
Companies have been encouraged to submit requests.
On Thursday, the ministry met with over 80 foreign businesses and chambers to assess the impact of US tariffs.
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“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,” said Michael Hart, President of the American Chamber of Commerce in China.
Hart noted that some pharmaceutical firms have already imported certain drugs without tariffs.
“He believed the exemptions were drug-specific, not industry-wide,” he added.
The CEO of French aerospace firm Safran said China had informed the company that it would exempt “a certain number of aerospace equipment parts,” including engines and landing gear.
These exemptions may help cut costs for companies in China and provide relief for US exporters, especially as the Trump administration shows signs of being open to negotiations.
The European Union Chamber of Commerce in China said it also raised the issue of exemptions with the commerce ministry and is awaiting a response.
“Many of our member companies are significantly impacted by the tariffs on critical components imported from the US,” said Chamber President Jens Eskelund.
A list reportedly containing 131 US product categories—ranging from vaccines and chemicals to jet engines—is circulating on Chinese social media and among business groups.
According to Huatai Securities, those items represented around $45 billion in US imports to China last year.
China’s customs agency and Ministry of Commerce did not respond to requests for comment.
The foreign ministry said it was not familiar with the exemption plans and referred inquiries to “relevant authorities.”
While the US has acknowledged the trade war is “economically untenable” and has offered some tariff relief on electronics, China remains firm.
It has repeatedly stated it is willing to endure the pain unless Washington lifts its 145% tariffs.
China faces economic headwinds—rising unemployment, deflation concerns, and excess export inventory.
Despite a $1 trillion trade surplus in 2024, it still depends on US imports for key goods like ethane and certain medications.
Pharmaceutical giants AstraZeneca and GSK have manufacturing facilities in the US that produce drugs for the Chinese market, according to official Chinese data.
Major ethane processors have also requested tariff waivers, citing the U.S. as their only supplier.
“For those US-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.
“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,” said Montufar-Helu.
(Reuters)
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