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S&P: 10% list 4 tariffs more damaging than previous 3

Dive Brief:

  • The impending 10% tariffs on $300 billion of Chinese imports, set to go into effect Sept. 1, would be more damaging than the previous three tranches because it includes more intermediary and finished goods, according to a report from S&P Global emailed to Supply Chain Dive.
  • As a result, S&P expects major firms, including Cisco, Dell, HP and Seagate, to raise prices or shift production and sourcing to Southeast Asia to compensate for projected revenue losses.
  • S&P, along with the Consumer Technology Association (CTA), expressed concern that whiplash from the trade war could hamper tech companies’ ability to innovate at a time when the U.S. and China are currently racing to develop and deploy artificial intelligence (AI), machine learning and 5G technologies.

Dive Insight:

According to the CTA, the upcoming tariffs include smartphones, laptops, smartwatches, wireless earbuds, lithium batteries and more. While consumers can expect varying degrees of price increases from brands if the 10% tariffs go into effect, changes in the cost of completed goods only tell a small part of the story.

Tech companies are looking to retool and diversify their supply chains in China and Southeast Asia, which is a resource drain and means less cash is available to invest in innovation, CTA Vice President of International Trade Sage Chandler told Supply Chain Dive. Many of the companies she works with rely on cheap manufacturing in China to invest in research, new designs and high-tech AI and machine learning applications in the U.S.

“A lot of the pieces of the supply chain that the administration is trying to help are actually getting hurt because now these extra companies do not have the extra income to pay those higher paying jobs here in the U.S.” Chandler said.

When a 25% tariff on $300 billion worth of Chinese goods was under consideration earlier this year, many firms echoed this sentiment, including Apple, saying they would be forced to reduce investment in or cut high-value research and manufacturing jobs in the U.S. due to increased supply chain costs from moving out of China.

“If you take their suppliers away from them what’re they going to do?” Chandler said. “They’re going to spend their time and resources finding another chain of supply.”

Chandler said the September date for the new 10% tariffs is coming at a terrible time for American firms as many are entering into new contracts for supply for the back to school and holiday seasons. While some of the bigger tech firms can survive a margin hit midway through this process, Chandler said 80% of the CTA’s approximately 2,400 members are small to medium-sized enterprises that might not be able to withstand the extra pressure.

“They get enough capital together to get prototypes done, run it over to China to manufacture and they’re in the water on the way back and the tariffs hit and they don’t have enough money to get their cargo out of customs. That is happening to a lot of our members” Chandler said. “There’s gonna be a lot of small and medium companies that … will go out of business because they can’t survive that cycle of going back to their board or the bank to get funding.”

08 August 2019 | Morgan Forde | Supply Chain Dive

https://www.supplychaindive.com/news/10-china-tariffs-list-four-damage-tech/560469/

Tariff whiplash is already taking a toll on retail

Retailers and brands have been scrambling to source elsewhere besides China, but it’s not easy, quick or even possible for everyone.

Welcome to the era of trade chaos for retail.

Beginning in May, retailers lived with the official reality that a huge swatch of Chinese goods — known as “tranche four” and covering pretty much everything that hasn’t already gone through tariff increases already — would get a 25% tariff. Retailers and analysts from nearly every sector warned of price hikes for consumers, disruptions to their supply chain and margin hits. Some companies began rushing in imports to beat the tariffs.

And then the industry got a respite, as the Trump Administration hit the pause button on the tariffs and opened up trade talks with Chinese leadership. You could almost hear the collective exhale of relief from brands and retailers around the country. Maybe the tariff apocalypse wasn’t coming, after all.

And then last week, in but a moment — a tweet — the wails and teeth gnashing resumed. President Donald Trump announced the administration would move forward on a reduced — but still substantial at 10% — round of new import taxes on $300 billion in Chinese goods, set to begin Sept. 1. Higher tariffs were not ruled out, and Trump indicated they could go even higher than the previous 25% mark.

Industry response was swift and severe.

“As we’ve said repeatedly, we support the administration’s goal of restructuring the U.S.-China trade relationship,” David French, the National Retail Federation’s senior vice president for government relations, said in a statement Friday. “But we are disappointed the administration is doubling-down on a flawed tariff strategy that is already slowing U.S. economic growth, creating uncertainty and discouraging investment.”

“Tariffs are taxes on American consumers,” Rick Helfenbein, president and CEO of the American Apparel & Footwear Association, said in a statement emailed to Retail Dive. “The President’s decision to proceed with adding these additional costs for hard-working American families is truly shocking.”

Matt Priest, CEO of the Footwear Distributors and Retailers of America trade group, said in a statement that his group was “dismayed” at the decision. “We will not take this news lying down,” he added. “This is one of the largest tax increases in American history and it is vitally important that we fight this action on behalf of our consumers and our industry.”

The dominant supplier

Retailers and brands have been shifting their sourcing away from China since Trump took office. A 2018 survey by the United States Fashion Industry Association (USFIA) found that a majority of companies said they are planning to cut back on the share of their product that is manufactured in China.

Even so, China remains the “dominant supplier,” accounting for 49% of total textile and apparel imports to the U.S. by quantity in 2018, USFIA said in a March report emailed to Retail Dive. The next largest supplier country is India, with a fraction of that amount at 8.1%. For just apparel, China is also the top supplier, but Vietnam grabs the second spot.

Where companies source their products would obviously determine to a large degree how they would fare when the tariffs launch.

“There are varying degrees of companies with exposure,” Mike Zuccaro, Moody’s senior analyst and vice president, told Retail Dive in June. He pointed to G-III Apparel Group, which does 86% of sales in the U.S. (where the tariffs would hit) and sources more than 61% of its products from China. “So that’s pretty hefty.”

Analysts with Cowen and Co. have also pointed out several retailers and brands that source heavily in China, among them American Eagle Outfitters (45% sourced in China), Boot Barn (44%), Target (30%), J.C. Penney (30%), J. Jill (30%), Macy’s (25%) and Kohl’s (20%).

In an ideal world, retailers and brands would shift sourcing to another country with relatively cheap and skilled labor so as to dodge the new duties.

B. Riley FBR analysts led by Susan Anderson said in a June note that many of the apparel and footwear companies they follow are working to shift their vendor base to other countries, mainly Vietnam, Cambodia, Bangladesh, Indonesia and India. In all, Anderson’s team estimates that the share of Chinese sourcing among the companies they cover went from 36% in 2017 to 29% in 2018.

The costs of moving out of China

Shifting supply chains is not easy, and doesn’t come without cost. For instance, Katie Tangman, Columbia Sportswear’s director of global customs and trade, testified in June that it would cost at least $3 million to move its remaining production operations out of China. Those costs include new machinery and training a new workforce.

Zuccaro said that it could take a year or two to find the equipment and move it into other countries. “Some companies have been able to move some things pretty quickly. But was that kind of low hanging fruit?”

“You have to look for places that can make your product in a quality manner,” he added. “You might be able to move something quicker, but if it’s a higher-end brand that really focuses on quality and craftsmanship and things like that … it might take a little while to just have to train people and build that up.”

Moreover, as the industry tries to shift to those other countries, they’re running into capacity limitations, Zuccaro also noted.

S&P Global analysts in a June report also pointed to near-term capacity constraints, especially for skilled manufacturing. “It is very difficult to replicate China’s well-developed and integrated technology supply chain elsewhere,” S&P analysts led by Jennelyn Tanchua wrote.

In some cases, replacing Chinese production might be nearly impossible, at least in the short-term. Take wedding apparel. Steve Lang, CEO at Mon Cheri Bridals and current president the industry group American Bridal and Prom Industry Association, told Retail Dive earlier this summer that his own company sources about 90% from China. The reasons for that have to do with more than cost alone.

“The Chinese have been good at embroidery and beading for 5,000 years,” he said. Moreover, factories for wedding apparel are more involved than those that make, say, T-shirts. Facilities must be air conditioned (because sweaty hands can stain white satin and other fabrics) and laborers need to be skilled. “We have a very, very technical product.”

Making things more difficult, new factories in places like Myanmar, where U.S. companies are shifting production, might prefer to take on easier-to-make products rather than wedding dresses, which could be a loss-maker for factories in the initial years, Lang added.

Eating tariffs

Costs started stacking up before tranche four had gone into effect and subsequently put on ice (only to be revived again). The National Retail Federation reported imports in May, the month after Trump announced the tranche four tariffs plans, would rise an estimated 4.2% from the previous year.

“The threat of tariffs is just about as impactful as actual tariffs, meaning people are scrambling, people are looking, people who are diversifying out of China are stepping up that process or expediting that process,” FDRA’s Priest told Retail Dive in June while the industry was preparing for the announced 25% tranche four tariffs.

As one example, Priest spoke with one of his members that had moved in 100,000 pairs of shoes earlier than planned and was trying to figure out the logistics of pushing those to its distribution centers, he said.

Rushed imports might beat the new tariffs, but they carry risks of their own given the ramped-up modern sales cycle. “Consumers are changing, their attention spans are shorter, the desire for fresh product is strengthened,” Priest said. “And when you have to kind of adjust to these artificial political timetables, to get product in to avoid duties, then I think it can disrupt the normal kind of cadence that you’ve established in the 21st century for American consumers.”

In some cases, retailers and brands might be able to renegotiate with their vendors, and effectively share the tariff burden with them. As Moody’s senior analyst and vice president Raya Sokolyanska pointed out in a June interview with Retail Dive, the yuan had depreciated shortly after a previous tariff increase on furniture, changing the relative cost of the goods. “So it was easy to go back to the vendors” and ask for price decreases, Sokolyanska said.

Moody’s department store analyst Christina Boni noted in an interview that scale and size matter. Those that are larger and of more importance to customers have more leverage to negotiate with vendors.

“The vendor needs you just as badly as they need as you need them,” Keith Daniels, a partner with investment and consulting firm Carl Marks Advisors, told Retail Dive earlier this summer. “Retail is the vendors’ customer. So I think the retailers will have the have the majority of the leverage.”

But there are limits.

“In essence, I think the headline is that you’re not going to be able to re-engineer it at all, you’re not going to get the vendors to eat it all,” Moody’s Boni said. “The consumer is going to have eat some of it … on some level.”

05 August 2019 | Ben Unglesbee | Supply Chain Dive

https://www.supplychaindive.com/news/tariff-whiplash-is-already-taking-a-toll-on-retail/560248/

10% China tariffs and the supply chain scramble

The tariffs will come as importers ramp up shipments for peak season, creating the potential to disrupt global supply chains and trade flows for the remainder of the year.

The 10% tariffs announced Thursday in a four-part series of presidential tweets sent U.S. importers into what Sue Welch described as a “scramble.”

“It’s really hard to plan for crazy,” Welch, the CEO of Bamboo Rose, told Supply Chain Dive. “And this is crazy.”

The 10% tariffs are on $300 billion worth of goods from China, also known as list four.

The announcement was not altogether out of the blue, given that such tariffs on this fourth list had been threatened before and gone through a public comment period and hearings. But the timing of the announcement was largely viewed as unexpected, after just one round of U.S.-China trade negotiations concluded.

“The swiftness with which it escalated I think is a little bit surprising,” Shehrina Kamal, product director of risk monitoring at DHL Resilience360, told Supply Chain Dive. “Now it does put in jeopardy the trade discussion that had been slated for September.”

The tariffs will also come at the start of the fourth quarter and near the beginning of peak season, creating the potential to disrupt global supply chains and trade flows for the remainder of the year.

What’s the impact of 10%?

Economic and trade impact analyses from earlier this year centered around the threat of 25% tariffs on list four goods. Some estimates predicted a 1.1% shrink in U.S. GDP with 25% tariffs on $550 billion of Chinese imports (all four lists combined), plus China’s retaliatory tariffs, in place.

While 10% may seem like a drop in the bucket compared to 25%, consultants and analysts told Supply Chain Dive the impact will still be significant, in part due to the wide range of products covered in list four.

Manufacturing sectors are particularly affected by the list four tariffs, Kamal said. In the fourth tranche, 437 product items are metals, 303 are machinery and 133 are chemicals. These three categories together amount to $77.7 billion in imports, according to Resilience360.

When tariffs impact operations and the bottom line in manufacturing, such effects ripple further down the supply chain. Chemicals listed for tariffs in the fourth round are used in the production of food products, beverages, pharmaceutical, personal care items and more.

The tranche four tariffs also garnered significant attention due to the myriad consumer products on the list, and the expectation that brands and retailers would have no choice but to push price hikes to consumers. The list includes apparel and footwear along with several types of consumer electronics.

“These additional tariffs will only threaten U.S. jobs and raise costs for American families on everyday goods,” David French, senior vice president for government relations at the National Retail Federation, said in a statement after Trump announced the 10% tariffs.

Trump: US to impose 10% tariffs on $300B in Chinese goods

UPDATE: Aug. 2, 2019: Trump told reporters outside the White House Thursday negotiators from the U.S. and China would meet again in early September. He said the reason for the Sept. 1 tariff implementation date was not to allow negotiation time, but rather because “it takes a long time for the ships to come over.”

Trump also alluded to the possibility the 10% duty rate could increase or decrease, depending on the outcome of negotiations. “It can be lifted up to well beyond 25%,” he said. “But we’re not looking to do that necessarily.”

Hua Chunying, spokesperson for the Chinese foreign ministry, said China is prepared to retaliate with “necessary countermeasures,” according to multiple news reports.

Dive Brief:

  • The U.S. will impose a 10% tariff on the remaining $300 billion worth of imports from China, known as list four, beginning Sept. 1, President Donald Trump tweeted Thursday afternoon.
  • The series of tweets came after U.S. representatives returned from trade talks with Chinese officials. Trump described the talks as “constructive,” but said China had agreed to buy agricultural products from the U.S. “in large quantities, but did not do so.”
  • Trump said the negotiations between the two nations will continue. Further details were not immediately available from the White House, the Office of the U.S. Trade Representative (USTR) nor the Chinese government.

Dive Insight:

Starting at the beginning of next month, every good coming into the U.S. from China, except those with exemptions, will have an import tax, ranging from 10% to 25%.

The tranche four tariffs on $300 billion worth of goods has been in limbo for several months, first as a repeated threat from Trump, via speeches and twitter.

The threat came closer to reality in May when USTR released a 136-page list of products to face tariffs up to 25% and held a comment period plus seven days of public hearings on the matter. In late June, Trump said he wouldn’t impose the list four tariffs “for the time being.”

Executives on earnings calls have warned about the effects of tranche four tariffs on their businesses, noting the potential for eroding margins and higher costs being passed on to consumers. Macy’s called this round “the big one.” The National Retail Federation said tariffs at 25% would be “too large” for retailers to absorb, though it did not specify at the time how 10% tariffs would affect retailers.

02 August 2019 | Shefali Kapadia | Supply Chain Dive

https://www.supplychaindive.com/news/trump-tariff-300-billion-10-september-1-china/560055/

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

https://www.supplychaindive.com/news/us-not-impose-tariffs-list-four-300b-chinese-goods/557929/

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

https://www.supplychaindive.com/news/tesla-tariff-exclusion-japanese-aluminum-imports/557678/

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

https://www.supplychaindive.com/news/trade-issues-top-National-Association-Manufacturers-NAM/557566/

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

https://www.supplychaindive.com/news/trump-xi-jingping-resume-trade-talks-g20-summit/557175/

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

https://www.supplychaindive.com/news/supply-chain-begins-to-feel-effect-of-tariffs/549632/

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

https://www.supplychaindive.com/news/trump-delays-tariff-hike-china-200-billion-march/549074/