US firms welcome proposed tariff cuts on Chinese goods

US businesses and industry groups have welcomed proposed tariff cuts covering $60 billion worth of goods, as the levies had created uncertainty ahead of the holiday season, trade experts say.

The US-China Board of Trade announced the proposed reductions on Sept 27, following a meeting between President Xi Jinping and US President Donald Trump in Washington. The plan covers exports from both countries.

China's Commerce Ministry said the US would cut tariffs on Chinese imports, including toys, home appliances, baby products and holiday gifts, while China would lower tariffs on US goods, including agricultural products, personal care items and medical devices.

Greg Ahearn, president and CEO of The Toy Association, said in a statement: "The toy industry is pleased that toys have been designated as a category of nonsensitive goods under the US-China Board of Trade framework. This marks a historic win for American toy companies — 96 percent of which are small businesses and families — especially as we approach the holidays."

Gary C. Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics, said the proposed tariff cuts could bring "significant gains" for both sides if implemented.

However, US Trade Representative Jamieson Greer recently said there was no set timeline for cutting tariffs on goods covered by the Board of Trade proposals.

"We have to stick to our legal processes," he told the G20 Trade Ministerial in Milwaukee on Oct 1.

Greer said other investigations into Chinese products under Section 301 of the US Trade Act would continue, including one targeting what he called excess manufacturing capacity.

In another significant move, the US and China extended by two months an agreement to suspend higher tariffs, which was due to expire on Nov 10.

While the extension offers US businesses some temporary clarity, many still want a long-term solution to bring greater stability to US-China trade ties, said Wei Liang, Gordon Paul Smith chair of international policy at the School of International Policy and Management, Middlebury Institute of International Studies at Monterey in California.

Uncertainty over the duration of future tariff pauses affects not only US companies investing in China but also those seeking to manufacture there and export to the US market, she said.

"They cannot just rely on this (pause of) six months, 10 months, 12 months, tariffs. They really need a clear message before they know what to do next. That market uncertainty has hurt a lot of business interests," she said.

Last year, top US imports from China included electrical and electronic equipment, machinery, computers, furniture, lighting, prefabricated buildings, toys, games, sports equipment, and plastics and plastic articles.

In the weeks leading up to the Washington summit, US businesses placed more orders for Chinese goods than a year ago, according to a survey by New York-based research firm China Beige Book.

The survey, seen by CNBC, found that as "China's relative tariff position improved", shipments to the US rose both year-on-year and month-on-month. The findings were based on a poll of 1,295 Chinese companies conducted from Sept 1 to 22.

The US government has repeatedly said tariffs would lower costs for US consumers and businesses. However, research released by the Federal Reserve Bank of New York on Oct 6 found that tariffs raised the prices of US-made goods because "producers pay more for imported parts and materials and because producers raise their markups when competing imports cost more".