In our last update on the trade war, we discussed the pending tariffs on 300 billion of goods coming into the US from China. These tariff would essentially apply to all other products not currently being taxed and were scheduled to take effect on September 1. Since then, Trump increased the tariff from 10 to 15%, but spread the goods across several effective dates; 125 billion of goods will still be taxed starting on September 1, with the remainder to follow as late as mid-December. The goods taxed in September will include some electronics and footwear. The bulk of apparel products will be taxed later in the year. The delay is in part to allow time for new trade talks in September.
WHAT HAPPENED LAST WEEK
This last week has been another boxing match in the China / US Trade War. Last Friday (8/23/19), China announced an increase in its tariffs on $75 billion worth of US goods. As a result, President Trump demonized China in a series of tweets, calling President Jinping his enemy and suggesting he would use emergency powers against China. He also ordered US companies to move their supply chains out of China, ideally back to the US. Later, Trump called President Jinping a great leader and claimed that China wanted to make a deal “very badly”. When challenged on his ability to make US manufacturers leave China, Trump doubled down, saying he has the right to make companies comply.
These quips and undiplomatic one-liners may make for trendy TV and short-lived jumps in stocks, but they are not good for politics. Many Chinese advisors think that Trump’s erratic behavior makes the situation too unstable for any deal to be made. Some Chinese academics speculate that a trade deal with the US is not necessary at this time. They argue that China is in a better position than the US to withstand the political and economic pressures of a drawn-out trade war. China might as well wait to see if they can negotiate with a new US President after the 2020 election.
Trade talks are still set to resume in September, but as we’ve seen in the past, the meeting might be called off, or it could result in another temporary truce. Trump seems to be taking the advice of advisors to spare the US economy from more tariffs going into the holiday season. Truce or no truce, a resolution of the trade war is unlikely in the near future.
This trade war greatly affects many of the clients we work with. Blacksmith is committed to finding solutions to the issues this conflict has created. Even if you are not a Blacksmith client, we are here to offer help and advice to product companies that have their supply chain in China. To find a solution for your product business, contact us here.
Chinese distrust in Trump deal because of Flip Flopping: https://www.bloomberg.com/news/articles/2019-08-27/wary-of-trump-s-flip-flops-china-prepares-for-worst-on-trade
At the expense of American companies in China: https://www.npr.org/2019/08/27/754777224/u-s-companies-in-china-get-caught-in-the-trade-war-crossfire