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News July 24, 2018

G-20 Summit Fails to Resolve U.S.-China Trade War

By  John Corrigan

The trade war between the U.S. and China dominated the discussion at the G-20 summit over the weekend, as finance ministers and central bankers of the world’s top 20 economies worried how the dispute may impact the global economy.

Before the two-day meeting in Buenos Aires, Argentina, President Donald Trump said that he was ready to impose tariffs on all $500 billion of imported goods from China, Reuters reported. The statement comes one week after the Trump administration vowed to impose a 10% tariff on $200 billion worth of Chinese goods such as fruits and vegetables, apparel, luggage and tech gear. The U.S. has already imposed 25% tariffs on Chinese goods worth $34 billion, which Beijing quickly responded to with tariffs on $34 billion worth of imported U.S. goods.

Tensions remained high during the G-20 as finance ministers made little progress in resolving the international dispute, The Wall Street Journal reported. U.S. Treasury Secretary Steven Mnuchin said the U.S. is ready to start talks on trade agreements with China, the EU and the Japanese, but those trading partners must first remove tariffs, non-tariff trade barriers and subsidies. Mnuchin also said that “it’s definitely a realistic possibility” Trump will follow through on his threat to impose tariffs on all $500 billion worth of imported Chinese goods.

In response, French Finance Minister Bruno Le Maire said the EU wouldn’t hold any talks while the U.S. tariffs are in effect because “we refuse to negotiate with a gun to the head.” He also said that if the U.S. follows through with a proposed 25% tariff on imported cars, Europe would have no choice but to retaliate.

China isn’t the only country in Trump’s crosshairs: the U.S. announced in June that it would be imposing 25% tariffs on steel and 10% on aluminum from Canada, the EU and other countries. Canada responded by imposing retaliatory tariffs on U.S. goods worth approximately $12.6 billion (C$16.6 billion), the value of the 2017 Canadian exports affected by the U.S.’s recent tariffs.

The International Monetary Fund (IMF) estimates the conflict between the U.S. and China would cost the world around 0.5% in gross domestic product, based on current measures and “in the worst case scenario.” The U.S. would be harder hit than other countries because a larger share of its exports will be subject to the punitive levies, according to the IMF’s calculations.

A prolonged trade war between the U.S. and China could prove challenging for the promotional products market, as prices on Chinese-made imported goods would increase. Industry firms – as well as retailers – would then have to decide whether to take a hit in their margins or pass the added cost onto buyers.

In 2017, a total of $506 billion in goods were imported from China, meaning the tariffs represent over 10% of the total annual value of Chinese imports, noted Joshua White, BAMKO’s (asi/131431) general counsel and senior vice president of strategic partnerships, in a white paper. White and BAMKO Vice President of Operations Max Levavi discussed the tariff proposals and how they’ll impact the promotional products industry in an exclusive podcast with Counselor in March.