(MENAFN- Live Mint) In a significant move to stabilise trade relations with Beijing, US President Donald Trump announced that his administration will slash fentanyl-related tariffs on imports from China and maintain the freeze on some reciprocal levies on Chinese goods.

The actions, made in a pair of executive orders issued on Tuesday, formalise the key elements of the sweeping trade deal struck in October with Chinese leader Xi Jinping in South Korea. Trump and Xi met on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit.

The reduced rates, effective 10 November, mark a major step back from the escalating trade war, easing the burden on US importers while securing vital commitments from China on counter-narcotics and agriculture, Bloomberg reported.

Tariff cuts lead the way to de-escalation

The most immediate change is the reduction of the tariff rate on fentanyl, which will be halved from 20% to 10%. Trump cited“progress with China's efforts” to do more to crack down on the trafficking of the deadly drug into the United States, noting Beijing's commitment to“take significant measures to end the flow of fentanyl.”

This measure also includes stopping the shipment of certain designated chemicals to North America and strictly controlling exports of certain other chemicals to all global destinations, Trump said in the order.

Simultaneously, Trump has also extended for a year a truce that saw him reduce his reciprocal tariff rate from 34% to 10%.

China pledges on minerals and agriculture

The reduced rates mark a significant concession to China. In return for the concessions, China committed to several economic and national security priorities for the United States.

Trump cited China's pledge to remove export controls on rare earth elements and other critical minerals and address retaliation against US semiconductor manufacturers in explaining his decision to further extend the tariff pause.

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China also committed to purchase US agricultural exports, including soybeans, sorghum, and logs, and agreed to suspend its own retaliatory tariffs on a“vast swath” of American agricultural products, Trump was quoted as saying by Bloomberg.

Trump also noted that the State Department and Department of Homeland Security will continue to monitor China's implementation of the agreement.“Should the PRC fail to implement its commitments as described in section 1 of this order, I may modify this order as necessary,” the president said.

Agreement duration and other details

That agreement is intended to last for one year, stabilising the turbulent relationship between Washington and Beijing that had them escalating threats in a bid for leverage ahead of the summit. The Trump-Xi deal, however, falls short of any enduring pact, setting the stage for renegotiations in a year and potential disagreements over enforcement sooner.

While the lower tariff rates are a relief for US businesses and importers, the deal is expected to draw criticism from China hawks who advocate for greater isolation of China over its history of predatory trade practices and dumping. The tariff rate on Chinese goods is now nearly the same as the levies applied to several Southeast Asian countries, easing a comparative disadvantage China had faced.

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The future of the ties between the two largest economies of the world will be gauged by planned meetings. Trump said he expects to visit China in the first half of next year and to host Xi in the US shortly after that trip. Those meetings will serve as crucial markers for the status of the truce. The deal also remains under a cloud of legal uncertainty, as the US Supreme Court reviews the constitutionality of Trump's use of emergency powers to impose country-specific levies, Bloomberg said in a news report.

Key Takeaways

• The reduction of fentanyl tariffs and the freeze on some China duties represent significant concessions in the US-China trade negotiations.
• China has committed to removing export controls on rare earths and purchasing US agricultural exports as part of the agreement.
• Ongoing legal uncertainties regarding tariffs are complicating the agreement as the US Supreme Court reviews the constitutionality of Trump's emergency powers.

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