China-US tariff cut could be bad news for smaller firms

(ECNS) – While the historic tariff deal between China and the United States is a big win for American companies and tech giants in China, it could be bad news for smaller firms.

The Information Technology Agreement (ITA), struck during an APEC meeting in Beijing last week, will end tariffs on about 200 products including semiconductors, medical equipment, GPS devices and online games. [Special coverage]

Currently, tariffs on semiconductors, MRI machines and GPS devices are as high as 25 percent, 8 percent and 8 percent respectively.

US statistics show that the ITA will eliminate tariffs on the global trade of $1 trillion in high tech products, improve global GDP by $190 billion, and create 60,000 jobs for the US.

China's big tech firms such as Huawei and Zhongxing will also benefit from the deal, which is set to boost their sales in the US market and help enhance cooperation with US firms.

However, for smaller firms in China, scrapping tariffs could mean tougher competition. China's fledgling semiconductor industry, for example, is likely to see sales drop as foreign products swarm in at lower prices. Imported high-end medical equipment is also likely to grab a bigger share of the market as the development of such products is still weak in China.

"High-tech products are bound to flood in thanks to the deal, and domestic producers will inevitably feel the pressure," said Ge Yibo, a statistician at Hangzhou customs.

The ITA will seek WTO approval in December.