• China has extended tariff exemptions on certain U.S. products until 2025, impacting global trade dynamics.
• This decision is seen as a continuation of the truce signaled by the Phase One Deal signed in January 2020.
• The U.S. has added 29 China-based companies to the Uyghur Forced Labor Prevention Act Entity List, prohibiting their goods unless proven not to involve forced labor.
• China's decision to extend tariff exemptions has significant implications for global economy and international trading system.

In a significant development that is set to impact global trade dynamics, China has announced an extension of tariff exemptions for certain U.S. products until February 28, 2025. The Customs Tariff Commission of the State Council confirmed this decision, which will see items such as rare earth metal ore, medical disinfectant, and nickel-cadmium batteries remain exempt from additional tariffs. These exemptions are seen as countermeasures to the U.S. Section 301 actions.

This decision comes amidst a complex backdrop of international trade relations, particularly between the U.S. and China. Over the past few years, the two economic superpowers have been embroiled in escalating trade tensions, culminating in a trade war and sanctions on Chinese technology companies. However, the landscape began to shift with the signing of the Phase One Deal on January 15, 2020, which marked the first signs of a truce.

The Phase One Deal and Its Implications

The deal agreed to the rollback of tariffs, expansion of trade purchases, and renewed commitments on intellectual property, technology transfer, and currency practices. The recent tariff exemption extension by China is seen as a continuation of this truce, signaling both sides' commitment to the implementation of the agreement. This move is expected to have significant implications for the global economy, particularly for industries reliant on the exempted products.

However, the global trading environment remains fraught with uncertainties. For instance, the U.S. Department of Homeland Security (DHS) recently added 29 China-based companies to the Uyghur Forced Labor Prevention Act (UFLPA) Entity List, bringing the total to 107.

This move is part of the Biden-Harris administration's efforts to combat alleged forced labor. As a result, starting November 25, 2024, U.S. Customs and Border Protection will enforce a presumption that goods produced by these 29 entities are made with forced labor and are therefore prohibited from entering the United States unless proven otherwise.

The Global Trading Landscape and Its Challenges

In addition to these developments, the global trading landscape is also being shaped by other factors such as changes in national security and economic policies, geopolitical risks, and the evolving dynamics of the global economy. For instance, the Biden administration has turned to industrial policy as a means of assuring the country's economic security. The Inflation Reduction Act (IRA), which represents the largest climate investment in history, allocating $370 billion to boost the green economy, is a significant part of this strategy.

On the other hand, the Trump administration had invoked "national security" to impose significant trade barriers on imports of a wide array of goods, including ones at the center of the trade and climate conversation. Under Section 232 of the Trade Expansion Act of 1962, the president has broad power to adjust imports if incoming goods are found to be a threat to U.S. national security. Under this process, the Trump administration enacted multiple tariffs on steel and aluminum in the name of national security.

In the context of these developments, China's decision to extend tariff exemptions for some U.S. products until 2025 is a significant move. It not only impacts the bilateral trade relations between the two countries but also has broader implications for the global economy and the international trading system. As the world continues to grapple with economic uncertainties and geopolitical risks, such decisions will play a crucial role in shaping the future of global trade.