China’s Finance Ministry has announced cuts in tariffs for 187 consumer products that are generally not produced in China. The cuts on average are equivalent to 9.6% points (to 7.7% from 17.4%) though some products see cuts of as much as 51% points (Vermouth-type drinks) and 25% points (shavers and clippers) to as little as 1% (antibiotics).
The timing is interesting. While it is tempting to assign the cuts to the recent meetings with President Trump, the move is part of an ongoing attempt by the government to boost consumer spending, Xinhua reports.
The cuts may not be necessary. Panjiva analysis of the HS-6 categories associated with the 187 products (147 in total) shows Chinese imports reached $34.7 billion in the past 12 months, having risen 33.9% in the third quarter on a year earlier. That took them to the highest since at least 2013.
Source: Panjiva
Growth was led by food and beverages (which climbed 79.8%) and cosmetics (47.6% higher) though the largest sector is pharmaceuticals (which grew 11.4%, reaching $16.4 billion for the past year).
Source: Panjiva
In the food segment the majority of the cuts, by value, are based in baby food and infant formula, which account for 43.6% and 19.5% respectively of imports in the past year. Baby food imports currently are led by shipments from Europe, while formula is led by the U.S. and Australia.
Source: Panjiva
The pharmaceutical sector more broadly has seen relatively modest cuts of up to 4%. However, this is one area where there is the potential to increase trade with the United States. As outlined in Panjiva research of November 14, imports have already grown by 12% annually over the past three years, but are currently dominated by shipments from Germany. Further lobbying from the U.S. government to improve access can be expected.
Source: Panjiva
The product group with the largest average tariff reduction generally are among home appliances, with 15.9% points of tariff reductions in general. Imports here are highly fragmented, averaging just $9.5 million per country-category pair for the top 300 combinations. That would suggest room for increased sales. Yet, competing with a manufacturing powerhouse like China in its own market may prove challenging even if the local production base is small currently.
Source: Panjiva