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January 22, 2019

Reports: U.S. Could Lift Tariffs on China

Still, President Donald Trump says no trade deal is imminent.

By  Christopher Ruvo

A report from The Wall Street Journal says U.S. trade officials are considering rolling back some or all of the import tariffs on China, while an analysis from Citi indicates that it’s plausible that the levies and China’s countermeasures could be suspended or rescinded this year. Dropping import tariffs would be welcomed by most in the North American promotional products industry, which imports the majority of the items it sells here from China.

While President Donald Trump panned the reports about his administration considering a tariff pullback as “false,” he did say that there has been progress toward a trade deal with China – the world’s second largest economy behind the U.S. "We've really had a very extraordinary number of meetings and a deal could very well happen with China,” the president said. “It's going well. I would say about as well as it could possibly go."

Still, Trump added that the tariffs on about $250 billion in Chinese goods will remain in place until there is a deal. "If we make a deal certainly we would not have sanctions and if we don't make a deal we will," he said.

Press reports indicate U.S. Treasury Secretary Steven Mnuchin has suggested withdrawing some or all of the U.S. tariffs to incentivize the Chinese government to make concessions the U.S. wants. However, U.S. Trade Representative Robert Lighthizer isn’t keen on the idea, fearing China will view the move as a weakness, thus giving Beijing a leg up in negotiations.

Chinese Vice Premier Liu He is scheduled to visit the United States on Jan. 30 and 31 for the next round of trade negotiations with Washington. Still, those negotiations weren’t off to an auspicious start, as the Trump administration turned down meetings this week that would have had two Chinese vice-ministers coming stateside for preparatory talks to the negotiations with Liu. Lack of progress on forced technology transfers and reforms of the Chinese economy that the U.S. team wants prompted the Trump administration to put the kibosh on prep talks, reports indicate.

Nonetheless, at least some analysts think a trade deal and the lifting of tariffs could occur in 2019. Citi, the multinational investment bank, put a new trade deal between the U.S. and China on its list of “Plausible Macro Surprises to Watch in 2019.” Recent positive statements out of Washington D.C. and Beijing are cause for optimism and could mean that an increase, to 25%, in tariffs on $200 billion worth of Chinese imports, scheduled for early March, could be averted, Citi found. There could even be a better result in the not-too-distant future.

"A significant U.S.-China breakthrough in trade talks — suspension of tariffs and more conciliatory tone than expected — would be a plausible macro surprise," Citi said. The bank says that potential economic headwinds in both nations, including slowing GDP growth in China and potentially in the U.S. too, could help fuel officials’ will to come to an amicable arrangement.

Certain executives in the promotional products industry told Counselor that they’re optimistic about a U.S.-China deal happening sooner than later. “I believe the China tariffs will be resolved by the end of the first quarter,” said Bob Herzog, CEO of Top 40 distributor Corporate Imaging Concepts (asi/168962).

U.S. import tariffs on China have been a top concern for promo firms headed into 2019. Suppliers and distributors have worried that the tariffs will trigger product price increases, supply chain disruption, destabilized annual pricing, catalog confusion, thinner margins, a potential shift in some end-client spend toward so-called “budget items” and more.