China VAT cuts give ¥225bn relief against US tariffs

China’s VAT cut from 16% to 13% at the start of April has given Chinese businesses tax relief of ¥225 billion ($33bn) in 2019. The tax subsidy was introduced to support Chinese enterprises as they faced US import tariffs.

The main beneficiaries of the indirect tax cut where manufacturers. There was also a cut in the reduced VAT rate from 10% to 9%, which applies to transport, construction, retail, entertainment and logistics services. The 6% reduced VAT rate on financial services and data/telephony remained unchanged.

US first collections of new tariffs on Chinese importers started this week. The US tariffs are targeting a range of consumer goods and IT infrastructure equipment. These first tariff arise following the US imposition of $200bn on goods in May 2019. Duties on Chinese goods arrivals to the US have been increased from 10% to up to 25%. Chinese has retaliated with $60bn in tariffs of between 20% and 25% on over 5,000 US goods. This is the second round of Chinese tit-for-tat tariffs; Beijing has already imposed levies of up to 10% on certain US goods.