According to a report published by Reuters on Tuesday, citing informed sources, China has reportedly rescinded the 125% tariff previously imposed on ethane imports originating from the United States. This tariff had been implemented earlier in the month. The decision marks a potential shift in trade policy between the two economic powerhouses.
Reuters highlighted the potential benefits of this policy reversal, stating, “The move will alleviate the financial burden on Chinese enterprises that rely on US ethane for their petrochemical manufacturing processes. Furthermore, it will provide a crucial outlet for the natural gas liquid, a byproduct of US shale gas production.” The report further emphasized China’s significant role as a consumer of US ethane, noting that, according to data from the US Energy Information Administration, China purchases approximately half of all US ethane exports. This decision could have significant implications for the energy markets and trade relations between the two countries, potentially boosting US ethane exports.
Market reaction
The announcement regarding the tariff waiver has, thus far, elicited a muted response from the financial markets. As of the time of this report, the US Dollar Index is trading up by 0.2% on the day, currently at 99.16. This suggests that the market has not yet fully priced in the potential implications of this development, or that other factors are currently exerting a greater influence on currency valuations. Market participants may be waiting for further confirmation or details before making significant adjustments to their positions.
US-China Trade War FAQs
In broad terms, a trade war signifies an economic confrontation between two or more nations, often stemming from heightened protectionist policies implemented by one or more parties. This typically involves the imposition of trade barriers, such as tariffs, which in turn provoke retaliatory measures. The resulting escalation of import costs can significantly impact the overall cost of living within the affected countries.
The economic friction between the United States (US) and China commenced in early 2018, triggered by then-President Donald Trump’s imposition of trade barriers on Chinese goods. Trump cited unfair trade practices and intellectual property theft as justification for these measures. China responded with retaliatory tariffs on a range of US products, including automobiles and soybeans. This period of escalating tensions continued until the signing of the US-China Phase One trade deal in January 2020. This agreement was designed to address structural issues within China’s economic and trade framework, with the aim of restoring stability and trust between the two nations. However, the onset of the Coronavirus pandemic shifted global priorities. Despite this, President Joe Biden, upon assuming office, maintained the existing tariffs and even introduced additional levies.
The potential return of Donald Trump to the White House as the 47th US President has reignited concerns about renewed trade tensions between the United States and China. During his 2024 election campaign, Trump pledged to impose tariffs of up to 60% on Chinese goods upon returning to office, which he did on January 20, 2025. With Trump’s return, the US-China trade war is poised to resume, potentially leading to a cycle of retaliatory policies that could disrupt global supply chains, reduce investment, and contribute to inflationary pressures, as measured by the Consumer Price Index.
