China has begun discreetly notifying companies that certain US-made products will be exempt from its steep 125% retaliatory tariffs, meant to shield manufacturers from the consequences of a trade conflict with Washington, according to sources familiar with the matter.

According to a Wednesday Reuters exclusive, Chinese authorities have not publicly announced the exemptions. Beijing seemingly wants to ease the country’s economic strain without appearing to have accepted defeat from US tariffs. 

Two individuals with direct knowledge of the situation said the list of products exempt from tariffs is being communicated privately to firms. Many of these firms rely on American technologies and had previously lobbied for relief.

Pharmaceuticals, chips, and aircraft engines are already exempt

Prior to April 27, China had already granted public tariff exemptions on a limited selection of imports, including pharmaceuticals, microchips, and aircraft engines. However, the existence of an unpublished “whitelist” of US goods qualifying for exemptions had not been reported until now.

One source working for a drug company that imports US-made medicines said the Shanghai Pudong government contacted them on Monday about the new list. The source claimed that the company, which had pushed for a reprieve, depends heavily on American technology.

“We still have many technologies we need from the US,” the person said.

Another individual said some firms have been instructed to reach out to authorities and ask if their imported goods are eligible for tariff relief.

Per an April 25 report from the Wall Street Journal, which cited a financial news update from Chinese outlet Caijing, China dropped tariffs on at least eight categories of US-made semiconductors. 

The article was later removed, but importers confirmed the changes to WSJ. A Shenzhen-based company listed the new exemptions on the Chinese social platform WeChat, including screenshots from a customs database showing zero percent tariff rates on specific US chip imports.

Are the US and China negotiating?

The behind-the-scenes concessions from Beijing and Washington could mean the two capitals have started negotiations or will soon. In mid-April, China insisted it would fight until the end unless the US rolls back its 145% tariff rates. 

Merely weeks later, US President Donald Trump said he is considering reducing the rates “substantially,” but not completely. 

President Trump, speaking Tuesday, said he believed a trade deal with China was possible but insisted that it would have to be fair. Beijing, however, has not mentioned or insinuated it would fall back on its tariff hikes. The Chinese government has been mostly “defiant” and refuted reports that any formal talks are ongoing.

“So much for ‘trade wars are easy to win.’ Turns out… when both countries depend on each other, the real war is about who can retreat more elegantly,” said one user on X.

In the southeastern port city of Xiamen, government officials distributed surveys to companies in the textiles and semiconductor sectors. The surveys asked about the products traded with the US and requested estimates on how tariffs have impacted business operations.

Targeted relief instead of concessions

Chatter on Chinese social media and industry experts say China is opting for targeted relief to its manufacturers, not sweeping exemptions. However, the focus of the trade tax waivers is on “irreplaceable” goods used for technological and medicinal purposes.

According to Nick Marro, principal economist for Asia at the Economist Intelligence Unit, China needs to protect its economic interests rather than any willingness to strike a near-term deal.

“Higher tariffs on these goods would’ve risked significant blowback onto China’s tech industry,” Marro said. “These carve-outs are a necessary evil.”

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