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News February 13, 2019

Trump Could Delay Increasing Tariffs On Chinese Imports

U.S. levies on $200 billion in Chinese goods are set to rise to 25% on March 2.

By  Christopher Ruvo

President Donald Trump said this week that he might be willing to delay increasing tariffs on $200 billion worth of Chinese imports from 10% to 25% - a move most in the domestic promotional products industry would welcome.

Don't Miss: More coverage of tariffs

The U.S. ad specialty industry imports the majority of products sold stateside from China. Tariffs have the potential to drive-up product prices, while spawning an array of other business headaches for promo pros, as Counselor has documented.

The 10% tariffs have already been unpalatable for the industry, but the looming jump to 25%, currently scheduled for March 2, could have far greater impact, potentially spurring significantly steeper product price increases.

Still, there could be a reprieve in the cards. Trump said Tuesday that he is open to extending the March deadline for striking a trade deal with China – a stay that could include keeping tariffs on the $200 billion of imports at the current 10%.

“If we’re close to a deal where we think we can make a real deal, I could see myself letting them slide for a little while,” Trump said in comments reported by The New York Times. He added that he wants any agreement “to be a real deal, not just a deal that looks cosmetically good for a year.”

U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer are meeting this week with Chinese officials for further negotiations. Chinese President Xi Jinping could participate in the talks aimed at outlining a potential deal, according to media reports. Trump has said he could eventually meet with Xi for negotiations, but added that he doesn’t plan to do so before the March deadline.

In comments this week, Trump characterized the trade talks as “going well,” but the U.S. and China remain far apart on important issues, according to analysts. Those issues include restrictions that China has placed on access to its domestic market, as well as Beijing’s insistence that American firms divulge valuable technology secrets in order to conduct business in the country.

The situation is also complicated by the fact that Xi is reportedly under pressure to refuse to agree to a deal that would weaken – or be perceived as weakening – China’s economic position. Of late, that position has already lost a little strength – in part because of the tariffs. China’s GDP grew at its slowest rate in 28 years last year and its manufacturing sector has sputtered.

In all, the Trump administration has imposed tariffs on $250 billion in Chinese goods. China has responded with counter tariffs on at least $60 billon in U.S. imports. Trump initially aimed to escalate the 10% levy on $200 billion in China-made products to 25% on January 1, but he said late last year that progress in trade talks made it reasonable to extend the rate acceleration date to March.

Some executives in the promotional products industry have 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).

Certain analysts think a trade deal and the lifting of tariffs could occur in 2019. Citi, the multinational investment bank, recently put a new trade deal between the U.S. and China on its list of “Plausible Macro Surprises to Watch in 2019.” 

“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 has said. The bank says that potential economic headwinds in both nations could help fuel officials’ will to come to an amicable arrangement.