China is considering exempting certain US imports from its 125% tariffs, according to sources.

The Ministry of Commerce has requested businesses to submit lists of goods that may qualify for these exemptions.

A list of 131 product categories, including vaccines, chemicals, and jet engines, has surfaced on social media.

However, its authenticity remains unverified.

Financial magazine Caijing reported that eight semiconductor-related items may be included, excluding memory chips.

This move comes as both China and the US struggle with economic challenges due to their ongoing trade war, with China facing weak demand and deflation signs.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Previous tariff exemptions reveal a pattern of pragmatic economic self-preservation

China’s current consideration of tariff exemptions follows a pragmatic pattern established during earlier phases of the trade war, when both nations quietly created escape valves despite tough rhetoric.

In 2019, the U.S. started granting exemptions to electronics manufacturers and other sectors struggling with the 25% tariffs on over $50 billion of Chinese goods, acknowledging the economic strain these measures caused domestic businesses 1.

China similarly used targeted exemptions as economic pressure increased, recognizing that certain goods lacked viable domestic alternatives, particularly in high-tech and industrial sectors where import substitution proved challenging.

The timing of these new potential exemptions coincides with China experiencing weak consumer demand, similar to conditions that motivated previous rounds of exemptions when economic realities overwhelmed political posturing.

This suggests Beijing’s move is less a concession in trade negotiations and more an acknowledgment of domestic economic necessities, particularly as its export-driven model faces pressure from significant tariff barriers.

2️⃣ Currency management as a strategic counterbalance to tariffs

China’s consideration of tariff exemptions comes after previously employing currency devaluation as a less visible countermeasure to offset trade war impacts, suggesting multiple levers are being adjusted simultaneously.