China weighs exempting some goods from US tariffs as economic fallout looms

China is reportedly weighing whether to exempt some U.S. imports from its 125% tariffs as the economic fallout in its ongoing trade war with Washington becomes more apparent. 

Per reporting from Reuters, a Ministry of Commerce taskforce is collecting lists of items that could be exempted from tariffs and is asking companies to submit their own requests. 

Financial news magazine Caijing reported on Friday that Beijing was preparing to include eight semiconductor-related items, but not memory chips.

A list of more than 130 categories of products eligible for exemptions – ranging from vaccines and chemicals to jet engines – was circulating widely among businesses and trade groups on Friday. 

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While the scope of possible exemptions remains unknown, Huatai Securities analyzed the list circulating in trade groups and said it corresponded to $45 billion worth of imports last year.

Washington has said the current status quo is economically untenable and has already offered tariff exemptions to some electronic goods. But Beijing has taken a harder stance, saying it is willing to fight to the end unless the U.S. lifts its tariffs. 

Exemptions are a bigger gesture of support, although, by allowing some trade to resume, they also reduce the pain for the U.S. economy and take some pressure off the White House.

The escalating trade war between the two world superpowers comes amid weak demand in China, where consumer spending and sentiment have never properly recovered from the pandemic levels.

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The government is pushing tariff-hit exporters to pivot to local markets, but companies say profits are lower, demand weaker and customers less reliable. 

Reuters contributed to this report.