China exempts some U.S. imports from 125% tariff rate

China has exempted some U.S. imports from its 125 per cent tariffs and is asking firms to identify critical goods they need levy-free, according to businesses that have been notified.

The move, which follows de-escalatory statements from Washington, signals that the world's two largest economies might be prepared to rein in their conflict, which had frozen much of the trade between them and raised fears of a global recession. 

Beijing's exemptions — which business groups hope might extend to dozens of industries — pushed the U.S. dollar up slightly and lifted equity markets in Hong Kong and Japan.

"As a quid-pro-quo move, it could provide a potential way to de-escalate tensions," said Alfredo Montufar-Helu, a senior adviser to the Conference Board's China Center, a think-tank.

But he cautioned: "It's clear that neither the U.S. nor China want to be the first in reaching out for a deal."

China has not communicated publicly on any exemptions.

U.S. President Donald Trump told Time magazine in an interview that U.S.-China talks were taking place on tariffs and that Chinese President Xi Jinping had called him. 

"He's called. And I don't think that's a sign of weakness on his behalf," Trump told the magazine. He did not say when Xi called or what the two leaders discussed.

Beijing has so far disputed the U.S. characterization of talks — the Chinese embassy said again on Friday that there have been no talks between the two countries, adding in a statement that the U.S. should "stop creating confusion."

A Friday statement by the Politburo, the Communist Party's elite decision-making body, focused on efforts to maintain stability at home by supporting firms and workers most affected by tariffs.

The readout, which followed the Politburo's regular monthly meeting, showed that Beijing was also ready to hunker down and fight a trade war of attrition if needed to outlast Washington in enduring trade war pain.

A Ministry of Commerce task force is collecting lists of items that could be exempted from tariffs and is asking companies to submit their own requests, according to a person with knowledge of that outreach.

The ministry said on Thursday it had held a meeting with more than 80 foreign companies and business chambers in China to discuss the impact of U.S. tariffs on investment and the operation of foreign firms.

"The Chinese government, for example, has been asking our companies what sort of things are you importing to China from the U.S. that you cannot find anywhere else and so would shut down your supply chain," American Chamber of Commerce in China President Michael Hart said.