Trump: US won’t impose tariffs on $300B Chinese goods ‘for the time being’

Dive Brief:

  • The U.S. will not impose list four of tariffs, on $300 billion worth of imports from China, “for at least the time being,” President Donald Trump said during a press conference Saturday after the G-20 summit in Osaka, Japan. Existing 25% tariffs on $250 billion of Chinese goods, along with China’s retaliatory tariffs, will remain in place.
  • Trump said the U.S. and China agreed to resume trade negotiations but did not specify a date or particular issues to be discussed.
  • “China is going to be buying a tremendous amount of food and agricultural product, and they’re going to start that very soon, almost immediately. We’re going to give them lists of things that we’d like them to buy,” Trump said, without providing details on how much or what types of products. “Our farmers are going to be a tremendous beneficiary.”

Dive Insight:

The decision to indefinitely postpone tariffs on nearly all remaining imports from China comes as welcome news to many of the businesses and organizations that testified during seven days of hearings at the Office of the U.S. Trade Representative in recent weeks.

Those who testified in opposition to the tariffs noted a lack of alternative sourcing options and increased costs that would degrade margins, raise prices for consumers or both.

“Pulling back from the brink of further tariff escalation is a good sign for retailers and their customers,” said David French, senior vice president for government relations at the National Retail Federation, in a press release emailed to Supply Chain Dive. He added he hoped continued negotiations between the two countries would lead to the lifting of existing tariffs, which amount to 25% duty rates on $250 billion of Chinese imports.

While export supply chains have been less impacted than import ones in the ongoing U.S.-China trade war, due to the trade imbalance between the two nations, agricultural supply chains have suffered from high supply, lower demand and in turn lower prices, as Chinese importers turned to nations such as Brazil to avoid paying tariffs.

The agreement for China to buy more agricultural products from the U.S. could provide some relief, depending on how much the country will buy and what types of goods.

29 June 2019 | Shefali Kapadia | Supply Chain Dive

Tesla receives 1-year tariff exclusion on Japanese aluminum imports

Dive Brief:

  • The U.S. Department of Commerce granted Tesla’s request for a tariff exclusion on Japanese aluminum imports this week. The tariffs are set at 10%, and the company uses aluminum to manufacture batteries for electric vehicles in its Nevada-based factory.
  • Tesla requested the exclusion in April for 10,000 metric tons annually of aluminum imports from Nippon Light Metal. The Bureau of Industry and Security (BIS), under the Commerce Department, granted this request for one year.
  • Tesla also requested exclusions for products affected by tariffs on Chinese imports, including key technological components like the Model 3’s autonomous driving “brain.” Those requests were denied earlier this month.

Dive Insight:

The specific type of aluminum for which Tesla requested a tariff exclusion “is not produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality,” according to the BIS document granting Tesla’s request.

The document offers insight into the rationale behind the waiver, that no reasonable alternative source of supply exists for Tesla.

There has been growing concern among U.S. automakers that domestic mining of metals such as lithium and aluminum (key materials for rechargeable car, laptop and smartphone batteries) is vastly insufficient to support expected demand. Roughly half of the world’s lithium mines are located in China, which also controls 60% of global electric battery production capacity.

If the trade war with China continues, domestic automakers worry planned production and expansion of electric vehicles could be hamstrung by the increased costs. Tesla is already struggling with financial losses, and CEO Elon Musk said the company will need to significantly cut costs going forward. The aluminum tariff waiver may give Tesla some breathing room.

26 June 2019 | Morgan Forde | Supply Chain Dive

56% of manufacturers say trade issues are a top concern

Dive Brief:

  • 56% of respondents in the National Association of Manufacturers (NAM) second-quarter survey cited trade tensions, including tariff threats against China and Mexico, as a top concern for their business.
  • Despite the concern, 80% of respondents said they had a positive outlook for their business, although that figure is down from almost 90% in March. The tariff spat with Mexico unfolded while this survey was being conducted, NAM said.
  • More than 80% also said the passage of the United States, Mexico and Canada Agreement (USMCA) was important to their company. “Manufacturers in America sell more to Canada and Mexico, our country’s largest two trading partners, than our next 11 trading partners combined,” the survey said.

Dive Insight:

The survey noted it “is no secret that manufacturers rely on trade to grow their businesses.” Protectionist measures, such as tariffs or other trade barriers, can impede growth and reduce confidence in the manufacturing sector.

Trade issues were also prominent in the Institute for Supply Management’s last monthly survey.

“Respondents expressed concern with the escalation in the U.S.-China trade standoff, but overall sentiment remained predominantly positive,” ISM Chair Timothy R. Fiore said in a statement.

Other challenges the 689 respondents to the NAM survey noted were the cost of raw materials and the ability to attract and retain workers. Hiring and retention challenges have led to more than 78% of respondents saying a reformed immigration system could address the workforce shortage, the survey notes.

Notwithstanding these issues, NAM said the manufacturing sector is still expanding, “albeit more slowly, and business leaders in the sector continue to be mostly upbeat,” a summary of the survey reads.

25 June 2019 | Matt Leonard | Supply Chain Dive

Trump, Xi to resume US-China trade talks at upcoming G20 summit

Dive Brief:

  • President Donald Trump announced via tweet June 18 he will meet with Chinese President Xi Jinping for “extended” trade talks at the upcoming G20 summit in Japan June 28 and 29. Trump previously said if Xi did not attend the G20, the U.S. would immediately levy tariffs on an additional $300 billion of Chinese goods, covering nearly all imports from the country.
  • “Leader level engagement at last year’s G20 was critical to jumpstarting the talks,” Clete Willems, a former trade negotiator for the Trump campaign, told Reuters, referring to the 2018 G20 meeting between Xi and Trump in Argentina. “It will be essential to managing the current political dynamic and getting the talks back on track once again.”
  • Meanwhile, in Washington D.C., more than 300 witnesses who represent major businesses and supply chain and manufacturing associations are testifying in U.S. Trade Representative (USTR) hearings to express their opposition to the proposed fourth tranche of tariffs. The hearings opened on June 17 and will close on June 25 before kicking off a week-long rebuttal period. Whether the tariffs are implemented will likely be subject to the results of the G20 negotiations.

Dive Insight:

While neither country’s delegation has released formal commitments, businesses on both sides of the Pacific hope for a resolution, or at least a stabilization, of the unpredictable trade war. However, as the previous year’s negotiations have shown, talks alone are not a guarantee. The last G20 meeting produced a 90-day truce, but the list three and list four tariff announcements came not long after the end of the truce.

The uncertainty has led to inventory stockpiling as companies try to rush goods to the U.S. ahead of the impending tariffs. While this has caused record-breaking traffic at some ports, and even capacity problems, the trend is beginning to slow down as demand has begun to soften and firms await the results of the trade talks.

Likewise, the recent proposition and scrapping of tariffs on Mexican imports has companies uncertain about where to go next in terms of materials sourcing and manufacturing.

“I started looking in Mexico, but I got scared off,” Mark Schneider, CEO of Kenneth Cole Productions, a clothing company, testified in a USTR hearing. “Some sort of stability with this type of discussion would be really helpful. There’s no preparation for anything.”

Companies that rely on China for electronics and machine parts also want a truce. David Baer, general counsel for domestic TV manufacturer Element Electronics, stated, “we will be forced to shut down the South Carolina factory and move our production offshore,” as the cost of components will be too high to sustain its U.S. operations.

Apparel is another vulnerable category. In an interview with NPR, American Apparel & Footwear Association CEO Rick Helfenbein said 42% of apparel and 72% of footwear into the U.S. comes from China. “We’ve been threatened with this for some time … And we don’t exactly have a place to go, which means, quite frankly, that prices will go up, that sales will go down,” Helfenbein said.

19 June 2019 | Morgan Forde | Supply Chain Dive

US export losses from trade war pegged at $40B

Dive Brief:

  • The trade war between China and the U.S. could result in an annual loss of $40 billion in U.S. exports, Industry Week reported citing research by the Institute of International Finance.
  • This impact can be seen at Asian ports where empty containers accounted for more than a quarter of all TEU traffic, according to The Loadstar.
  • None of this is great news for ocean carriers that make their money by hauling freight, not empty boxes, and could lead to higher annual contracts in the future, according to The LoadStar.

Dive Insight:

Perhaps the fundamentals of launching a trade war with China have merit. The theft and mistreatment of intellectual property, a potential monopoly around 5G cellular technology and market damaging dumping of some commodity products reflect an economic approach that has impacted the U.S. economy. The use of tariffs as an economic disincentive to penalize China for these activities is certainly one way to get their attention and to seek a negotiated solution.

Successful supply chains depend on long term stability. The politicization and mercurial approach to the application of tariffs on China, as well as the threats of tariffs on other countries, have created economic uncertainty. Public negotiations, often driven by social media, are not helpful at best and confusing and counterproductive at worst. Successful planning is proactive, not reactive.

The impacts of the tariffs can be felt throughout the supply chain. Tariff related cost increases are already being felt by many organizations and they are being passed on to customers and end users. Supply chains have been disrupted, and modified, because of current and threatened tariffs. Inventory has been purchased to hedge against increased costs, impacting operations and planning throughout the supply chain. Exports of certain agricultural products are down, forcing the U.S. government to provide subsidies to the growers most impacted.

The imbalance of shipping containers is but a symptom of misaligned supply and demand caused by the ongoing trade skirmishes. But it is also an indicator of real impact on the supply chain. No matter the political positioning, the tariffs have caused uncertainty in a process that thrives on consistency and dependability. While the trade issues with China now hopefully look like they may be resolved in the short term, long term ramifications in the supply chain are just coming into view.

04 March 2019 | Rich Weissman | Supply Chain Dive

Trump delays tariff hike initially scheduled for March

Dive Brief:

  • Tariffs on $200 billion worth of imports from China will remain at the current level of 10% for the time being, after President Donald Trump tweeted Sunday evening he would delay the scheduled increase to 25%. He did not specify the future date until which the tariff hike might be delayed.
  • The President in a two-part tweet pointed to “substantial progress” in trade talks between the U.S. and China, and called the negotiations “very productive.”
  • “Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement,” Trump tweeted. He did not say when the summit would be held.

Dive Insight:

Trump has alluded over the past several weeks to the possibility he would extend the trade deadline, originally scheduled for this upcoming Friday, March 1.

The initial deadline was set after he met with Chinese President Xi Jinping at the G-20 summit in Buenos Aires last year. Several rounds of trade talks have taken place in the U.S. and China since then. U.S. Trade Representative (USTR) Robert Lighthizer led the most recent round of high-level discussions this past Thursday in Washington.

The tweets from Trump come in contrast to Lighthizer’s repeated message that March 1 is a “hard deadline” for the U.S. and China to hammer out a deal. The USTR had not released a statement on the tariff delay as of press time.

Trump, along with several members of the administration, cited progress in a series of trade negotiations between the two countries, but no one has revealed significant details of what the progress entails. The White House also has not released a statement confirming Trump’s tweets or offering specifics on the progress of the trade talks.

Lighthizer will testify before the House Ways and Means Committee Wednesday, which may give us some specifics on the trade discussions and what progress was made related to intellectual property, technology transfer and additional issues the U.S. and China set out to resolve.

Trump said previously no trade resolution would be finalized until he and Xi met. If the two presidents meet in the near future, as Trump hinted in his tweet, it may be a sign a trade deal is in the cards.

What that means for tariffs, however, is uncertain. Trump said he would delay the tariff increase, but did not specify to what date, leaving businesses in limbo. It’s also important to note Trump said he would “delay” — but not cancel — the tariff increase.

For now, companies should still expect to see tariffs rise to 25%. The question is, when?

24 February 2019 | Shefali Kapadia | Supply Chain Dive

US-China trade talks resume in Washington

Dive Brief:

  • The U.S. and China will hold additional rounds of trade talks this week in Washington, the White House announced Monday.
  • “Deputy-level meetings” begin Tuesday, the White House said, led by Deputy United States Trade Representative Jeffrey Gerrish. The U.S. will hold “principal-level meetings” starting Thursday. U.S. Trade Representative Robert Lighthizer will lead those talks, which will also include Treasury Secretary Steve Mnuchin, Commerce Secretary Wilbur Ross, Assistant to the President for Economic Policy Larry Kudlow and Assistant to the President for Trade and Manufacturing Policy Peter Navarro.
  • The two countries will discuss structural changes related to trade and China’s agreement to “purchase a substantial amount of goods and services” from the U.S., but did not offer additional details, the White House said.

Dive Insight:

The administration has kept mum for the most part on details of the ongoing trade talks between Washington and Beijing.

After the most recent round of talks, which took place in Beijing, U.S. officials touted “progress” on trade issues the two countries set out to resolve during a 90-day negotiation period, but they offered no specific detail on what that progress entailed.

China purchased shipments of soybeans from the U.S. (the exact amount is unclear) since the trade talks began, a sign of progress in China agreeing to import “substantial” amounts of goods from the U.S. On structural issues such as intellectual property and technology transfer, however, neither the U.S. nor China has revealed any specific progress.

Donald Trump hinted last week he might consider an extension to the March 1 trade negotiation deadline, although the White House made no mention of that in its latest announcement on continuing trade talks. Lighthizer previously called March 1 “a hard deadline.”

The numerous unknowns surrounding trade talks and deadlines leave businesses in a state of uncertainty related to tariffs.

Economic Policy Uncertainty uses economic data and news reports to create a monthly index of uncertainty. In January 2019, it measured U.S. uncertainty at an index of 292, an all-time high since the index began tracking data in 1997 and slightly higher than the global index of 285. In January 2017, the U.S. index measured just 161.

Still, analysts are hopeful the U.S. and China will reach a deal later this year, though it likely will come after the March 1 deadline, and it’s unclear what effect the trade deal would have on existing and future tariffs.

19 February 2019 | Shefali Kapadia | Supply Chain Dive

Retail imports strong ahead of possible tariff hikes

Dive Brief:

  • U.S. retail container imports were up 8.8% in December over November — down from the peak last fall but still higher than normal — as the tariff increase on goods from China looms, according to the latest Global Port Tracker report from the National Retail Federation (NRF) and Hackett Associates.
  • Overall, 2018 experienced a record 21.8 million TEU, an increase of 6.2% over the 2017 record of 20.5 million TEU. Estimates for the first half of 2019 predict volumes will rise 4.1% over the first half of 2018.
  • Retailers have accelerated imports to beat the March 1 deadline when U.S. tariffs on $200 billion worth of Chinese goods will increase from 10% to 25%, unless negotiations are successful.

Dive Insight:

Talks began in December to resolve the trade dispute, but retailers have been preparing for higher costs on imports since last year, according to NRF.

“With trade talks with China still unresolved, retailers appear to be bringing spring merchandise into the country early in case tariffs go up in March,” said Jonathan Gold, vice president for supply chain and customs policy. “We are hopeful that the talks will succeed, but until the trade war is behind us, retailers need to do what they can to mitigate the higher prices that will inevitably come with tariffs.”

The Globe Tracker Report covers the U.S. ports of Los Angeles/Long Beach, Oakland, Seattle and Tacoma on the West Coast; New York/New Jersey, Port of Virginia, Charleston, Savannah, Port Everglades, Miami and Jacksonville on the East Coast, and Houston on the Gulf Coast.

Retailers may be doing their best to ensure stocked shelves, but a side effect of robust imports is a shortage of space in warehouse and storage facilities. Available U.S. warehousing and logistics space sits at a multiyear low, according to real estate researcher CBRE Group. In the fourth quarter of 2018, availability for industrial real estate fell to its lowest level since 2000.

To make do, companies and warehouse providers are scrambling for creative solutions like short-term storage trailers and digital marketplaces for warehouse space.

Retail products are not the only commodities surging ahead of the tariffs. According to BIMCO analysis of USDA figures, 754,609 metric tons of soybeans were ready to be shipped to China in January, compared to 25,347 metric tons in December.

13 February 2019 | Garry Wollenhaupt | Supply Chain Dive

Trump, Xi won’t meet before March 1 tariff deadline

Dive Brief:

  • President Donald Trump told reporters at the White House Thursday he would not meet with Chinese President Xi Jinping before the March 1 deadline, after which 10% tariffs are set to rise to 25%. Trump said previously he would meet Xi in February.
  • When asked by reporters if he planned to meet with Xi next month, the President said, “Not yet. Maybe. Probably too soon. Probably too soon,” according to Reuters.
  • U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing next week for another round of trade discussions. Lighthizer and Chinese Vice Premier Liu He met last week in Washington for trade talks.

Dive Insight:

Trade discussions between the U.S. and China are far from over. Several rounds have taken place since Trump and Xi agreed to a 90-day halt on tariff increases last year at the G-20 summit, and additional discussions are scheduled for next week.

But the likelihood of reaching a deal in the near future is waning. The deadline is rapidly approaching with no plans in place for the two presidents to meet. “No final deal will be made until my friend President Xi, and I, meet in the near future,” Trump tweeted on Jan. 31.

What happens to tariff rates on March 2 remains unclear. After the 90-day “cease-fire” was announced, the Trump administration maintained tariffs on $200 billion worth of Chinese imports would rise from 10% to 25% if the two parties did not reach a deal before the deadline.

“The likely outcome is that the tariffs remain at the current 10 percent rate,” CNBC reported Thursday, citing administration officials and sources briefed by the White House.

But Reuters later cited three anonymous sources who indicated the CNBC report was incorrect.

Maine Pointe CEO Steve Bowen told Supply Chain Dive he doesn’t expect Trump to back down “one iota” from his plan to raise tariffs and negotiate trade issues with China.

He does anticipate the U.S. and China could reach a deal later this year to remove the tariffs, with the upcoming election cycle playing a role in the timing. The CEO of agricultural trader Archer Daniels Midland (ADM) made a similar prediction, expecting a trade resolution with China this year.

The March 2 tariff hike (if it happens) won’t come as a surprise to the business world. The U.S. and China sought to resolve deep-seated trade issues in just three months, and analysts largely agreed the short time frame did not provide sufficient time for matters such as intellectual property and technology transfer.

Businesses have been planning for the scenario of rising tariffs at the beginning of next month, by rushing imports and stockpiling goods — although that doesn’t mean companies are embracing increased duties.

“Retailers are doing our best to mitigate the pain, but raising tariffs on thousands of consumers products causes massive disruption to retailers in an already uncertain environment,” Hun Quach, Vice President for International Trade at the Retail Industry Leaders Association, told Supply Chain Dive in an email. She described the deadline as a “black cloud.”

study released Wednesday by Tariffs Hurt the Heartland, a campaign opposed to tariffs, said an increase to 25% would reduce employment by 934,000 jobs and GDP by 0.37%.

Until now, a good deal of optimism has surrounded the U.S.-China trade negotiations, which Bowen said lead some companies to relax a bit and back off of their contingency planning. “They’re making a mistake because they need to be prepared,” he said.

07 February 2019 | Shefali Kapadia | Supply Chain Dive

A trade deal with China is ‘miles and miles’ away, Commerce secretary says

Dive Brief:

  • A delegation of roughly 30 Chinese trade negotiators will visit the White House next week to resume trade negotiations, but U.S. Commerce Secretary Wilbur Ross told CNBC Thursday, “we’re miles and miles from getting a resolution.”
  • The next round of negotiations taking place next week is the result of a 90-day delay of further tariff hikes that runs out March 1. After that, tariffs on $200 billion in Chinese goods will increase from 10% to 25% if the parties cannot reach an agreement.
  • Ross said negotiators have “quite a little bit of time” before March 1 to figure out if a deal is possible. Courtney Rickert McCaffrey, manager of thought leadership in A.T. Kearney’s Global Business Policy Council, told Supply Chain Dive in December the March 1 timeline is “incredibly ambitious.”

Dive Insight:

Ross said it shouldn’t be surprising a deal hasn’t yet taken shape since “trade is very complicated.” He added negotiations go far beyond quantities of fuel and other commodities, and the real differences are in “structural reforms” in the Chinese economy and “enforcement mechanisms.”

Though China has made some concessions in agreeing to purchase more U.S. agricultural products, the White House has made it clear the issues of intellectual property and technology transfer are the tougher and more important issues.

In December, the Trump administration said in a said in a statement that these negotiations would revolve around “structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture.”

In his comments, Ross left wide open the possibility that the two parties could indeed reach an impasse, allowing tariffs to rise.

24 January 2019 | Emma Cosgrove | Supply Chain Dive