Tariffs come amid an ongoing trade war between the US and China and could risk destabilising the global economy further.
The drop mounts pressure on Chinese leaders to avert politically dangerous job losses as they fight a tariff war with US President Donald Trump over Beijing's trade surplus and technology ambitions.
Trump's decision marked the third time since August that the United States has delayed or removed tariffs on Chinese imports ahead of the year-end shopping season.
The drop comes after a surprise 3.3 percent rebound in July despite the yearlong battle with Washington and weakening global demand.
Yields on benchmark 10-year Treasury notes dropped to their lowest since mid-2016 as the latest salvos in the China-US trade war shook confidence in the world economy and sent investors to the safe harbour of gold.
US President Donald Trump says he would be raising planned tariffs on $300 billion in Chinese goods from 10 percent to 15 percent.
China said it would impose additional tariffs on a total of 5,078 US products that include agricultural products, crude oil, small aircraft and cars. Tariffs on some products would take effect on September 1 and others on December 15.
Also boosting investor sentiments were comments from China that the Washington and Beijing held discussions on trade overnight and would talk again the next two weeks.
The United States delays tariffs on Chinese-made cellphones, laptop computers and other items and removes other Chinese imports from its target list altogether.
The yuan has now weakened around 1.5 percent since US President Donald Trump threatened last Thursday to impose more tariffs on Chinese goods from September 1.
The US President Donald Trump has already imposed 25% tariffs on $250 billion in Chinese products, and Beijing has retaliated by taxing $110 billion in US goods.
Trade conflicts are undercutting investment, International Monetary Fund says in report, while urging countries to avoid using tariffs in place of negotiations.
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