Just a week ago at the NATO meetings, President Trump suggested that there was a strong possibility that a United States-China trade deal could be pushed off, or put on hold, until after next year’s Presidential election.
Given the levels of confusion and uncertainty, and, not to mention, unpredictability, the U.S.-China “trade war” has wrought going back to March 2017, when Trump first broached the possibility of levying tariffs on China, it stands to reason that Trump’s raising the specter of a delay in any true semblance of U.S.-China trade accord would not be well-received in supply chain and logistics circles.
Well, it now appears that a crisis may be averted, with a limited trade agreement between the U.S. and China having been reached, according to a Wall Street Journal report.
According to the report, this deal would “roll back existing tariff rates on Chinese goods and cancel new levies set to take effect Sunday (on more than $150 billion worth of goods) as part of a deal to boost Chinese purchases of U.S. farm goods and obtain other concessions.” And it added that the deal would also “call for China to buy $50 billion worth of agricultural goods in 2020, along with energy and other goods. In exchange the U.S. would reduce the tariff rate on many Chinese imports, which now ranges from 15% to 25%.” It also said that the U.S. would cut existing tariff rates by half on roughly $360 billion in Chinese-made goods.
As for China’s concessions, a research note from global trade intelligence firm Panjiva indicated China may make firm commitments on agricultural purchases, intellectual property protections and financial market access. Panjiva also observed that should China not deliver on its commitments the tariff program could snap back into place.
“The snap back possibility means that corporate supply chains will continue to face uncertainties,” the firm said. “Nonetheless, there’s the possibility that some strategies to switch away from China have been accelerated too quickly.
When Trump said at NATO that a deal may be pushed back, it was observed in this space that it goes without saying that increased U.S.-China trade uncertainty makes for difficult operating conditions, especially with supply chains’ myriad moving parts that are susceptible to more than a few things, like adverse weather, financial market actions, labor issues, and IT snags. And when adding continued trade issues, with no definitive end in sight, it makes for more of the same, a difficult situation.
So, with that as a backdrop, this development is, and should be viewed as, very good news for both supply chain stakeholders and consumers alike, with certainty coming for the former and lower costs for the latter.
But before we get too far ahead of our skis, let’s see what happens from here, as we all know and have seen just how quickly things can change inside the Beltway.
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