Keep the celebratory wine in the cellar.

That was the general assessment leading promotional product executives made of the so-called “Phase One” trade deal. President Trump said on Friday that the U.S. and China are nearing an agreement, but reactions in promo ranged from mild relief and cautious optimism, to outright suspicion that the surface-level progress doesn’t signal the two sides are substantially closer to a deep-reaching, impactful new agreement on trade.

“It offers some hope that we’ve turned the corner towards a positive resolution to the trade war, but this is only a handshake deal, and it appears to offer only a temporary lull to the hostilities,” Eddie Blau, CEO of Top 40 supplier Innovation Line (asi/62660), told Counselor. “On balance, it’s definitely more positive than negative, but multiple uncertainties still exist.”

Promo pros have been closely tracking the more than year-old trade battle between the world’s two largest national economies. The vast majority of the products sold in the domestic promotional products industry are made in China. President Trump’s tariffs on approximately $360 billion in Chinese imports to date have triggered price increases on certain ad specialties, with more likely forthcoming, and caused other negatives for promo, including fostering uncertainty in the marketplace that some fear could lead to pullback in end-client spend.

That uncertainty and the tariffs continue to be a problem, industry executives said.

“As we’ve seen through the first few rounds of this trade war, we must expect the unexpected,” Chris Anderson, CEO of Top 40 supplier HUB Promotional Group (asi/61966), told Counselor. “As such, unless a broad-based compromise is reached, businesses will continue to employ defensive strategies – which, in the aggregate, becomes a drag on economic growth and further undermines confidence in the global economy.”

Jamie Stone, president of Seattle-based distributor Gifts By Design (asi/205947), said that the stock market might take the lightening in tensions as a hopeful sign, but that promo isn't about to see an immediate direct benefit. "Our industry’s suppliers need to know what their products will cost landed and delivered to their facilities, so until the trade war is settled and finalized, it will continue to wreak havoc on our industry, especially as it impacts large overseas custom import orders, where the prices may change from order placement to delivery, based on the tariffs," Stone told Counselor.

We are not completely out of the woods with regards to trade war concerns. The Fed will continue to cut rates; with no recession, it's likely we will see another leg up. But until sound base structures proliferate in individual names, expect volatility in a "hard penny" market.

— Mark Minervini (@markminervini) October 14, 2019

The Trump administration and some analysts have called Friday’s agreement the first phase in an eventual comprehensive trade deal between the U.S. and China. Other analysts say it rises only to the level of a tentative truce that could be wiped off the table at any moment.

Regardless, the immediate, most relevant upshot for promo is that Trump agreed to delay hiking the tariff rate on $250 billion worth of Chinese imports from the current 25% to 30% on Tuesday (Oct. 15) as he had been planning. That means promo products affected by that batch of tariffs, including bags, stationery, select drinkware, tech and accessory items, will continue to be tariffed at the current 25% rate. Whether or not Trump will ever look to hike the rate remains unclear. At this point, the president still plans to impose duties of 15% on another nearly $200 billion in Chinese imports by Dec. 15. Should that occur and current levies remain on the books, then virtually every product the U.S. brings in from China will be subject to a duty of either 15% or 25%.

As part of Friday’s handshake agreement, formal legal language for which still needs to be written up and signed off on by Beijing and Washington, D.C., China has agreed to purchase up to $50 billion worth of U.S. agricultural products. Trump said China also will address issues related to intellectual property theft and other U.S. concerns, though details were scant. Analysts noted that talks could break down, as they have in the past, over potential hot button issues like China’s forced transfer of technology from American companies doing business in China, the U.S. desire for greater access to Chinese markets and the U.S. insistence that China limit subsidies of its state-owned businesses. In a potentially troubling sign that the “Phase One” deal is far from done, Bloomberg Media reported that China wants to hold more talks later this month before signing off – with a possible demand being that the U.S. not proceed with the planned Dec. 15 tariffs.

Scoop from my colleagues in Beijing: China isn’t ready to sign what Trump calls the “phase one” deal without more talks later this month. Beijing also wants commitments prior to signing that the next round of U.S. tariffs, scheduled for Dec. 15, is off. https://t.co/HbWc1uIgzI

— Jenny Leonard (@jendeben) October 14, 2019

Despite such concerns, some top promo executives were heartened to see what they characterized as progress toward a trade deal, rather than increased rancor and a heating up of tensions. “We can be optimistic. This appears to be a positive sign that the dialogue is moving from posturing to solution gathering,” Terry McGuire, senior vice president of vendor relations at Top 40 distributor HALO Branded Solutions (asi/356000), told Counselor. “It’s certainly a step in the right direction toward stability in our industry’s supply chain, as we’re heavily dependent upon goods manufactured in China. Nonetheless, further positive steps are needed to ease the concerns of other sectors of the economy.”

Meanwhile, Tej Shah was feeling a sense of optimism. “I think this deal can only help our industry,” the vice president of marketing and ecommerce at Top 40 distributor Overture Promotions (asi/288473) told Counselor. Similarly, Anderson was happy for a reprieve on heightened tariffs. “The promotional products industry has been granted, even if temporarily, an opportunity to focus on delighting its end users in the traditionally busy fourth quarter – instead of navigating yet another round of tariffs,” he told Counselor.

Still, there was a fair deal of skepticism among industry pros about where the trade talks are headed – and what that will ultimately mean for promo. “It’s too early to tell what this means until the deal has been signed and sealed,” Shamini Peter, chief operating officer at Top 40 distributor Axis Promotions (asi/128263), told Counselor. “Based on past practice, there’s always a possibility of this going back to the drawing board. Given that the U.S. and China are giants and have the ability to directly impact global economy, the two presidents have to find a balance in the deal.”

Elsewhere, Josh White said the “Phase One” deal has him nonplussed. “The deal is really narrow in scope – essentially a pause in escalation,” the general counselor and senior vice president of strategic partnerships for Top 40 distributor BAMKO (asi/131431) told Counselor. “Any de-escalation is positive for the promo industry, but it’s such a small step. The deeper issues underlying the conflict remain unresolved. I don’t expect a resolution to any of them for the foreseeable future. I’ll gladly cheer any positive steps, but I remain highly pessimistic about the medium-term outlook here.”

As a result of the trade war, the promo industry has faced issues that include increased product prices, destabilized annual pricing, challenges in producing catalogs and an ever more uncertain selling environment. The conflict has also made longer-term planning more difficult for some suppliers and caused suppliers (and certain distributors that source direct from abroad) to increasingly look beyond China to produce products. As the search for new sourcing destinations accelerates, some industry leaders worry that more product safety and social responsibility issues will arise.