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News July 08, 2019

China: Nix Import Tariffs, Or No Trade Deal

Despite the hard line, top negotiators from the U.S. and China have resumed trade deal talks – a potentially important development for the promotional products industry.

By  Christopher Ruvo

Government officials from China say there is a “ray of hope” in trade talks with the United States, but are maintaining that the Trump administration must remove import tariffs on Chinese goods if a deal between the world’s two largest national economies is to be inked.

Those are a couple of the latest developments in the U.S./China trade war, which has seen President Donald Trump impose tariffs on about $250 billion in Chinese imports, with China responding with retaliatory levies on tens of billions of dollars of American products. The dispute has triggered price increases and related disruptions in the promotional products industry.

Following a meeting between Trump and Chinese President Xi Jinping at the G20 summit in late June, the two nations agreed to resume trade talks, which had ground to a halt in May. Trump also agreed to hold off on imposing tariffs on an additional $300 billion or so in Chinese goods.

It was a positive step for those that want to see China and the U.S. reach a trade deal. Further cause for optimism came with recent word from Larry Kudlow, economic advisor to the White House, that top trade negotiators for the U.S. and China have begun speaking again by phone. More talks are planned, with possible face-to-face meetings down the line.

Bai Tian, Beijing’s ambassador to Malaysia, said Monday in an economic forum in Malaysia that the resumed talks represent a “ray of hope” for easing trade tensions.

Nonetheless, fundamental challenges remain. Chinese officials are insistent that U.S. tariffs on Chinese goods must be lifted for a deal to be struck. “If the two sides are to reach a deal, all imposed tariffs must be removed,” said Gao Feng, spokesman for China’s Ministry of Commerce. “China’s attitude on that is clear and consistent.” Top U.S. negotiators have so far maintained that some tariffs must remain in place as a means of enforcing China to abide by the terms of any future trade deal.

Other negotiation hurdles are in play, too. For instance, the U.S. is adamant about getting China to change its laws in order to increase intellectual property protections for American companies. Trade talks withered in May because China reportedly backtracked on agreeing to such protections.

As of now, there isn’t a timeframe for when a trade deal could be reached.  “The issue is if you want quality, we do not have to have speed,” Kudlow told Bloomberg. “It’s going to be difficult, no question.”

The domestic promotional products industry imports the vast majority of products sold here from China. Import tariffs have led to price increases on levy-affected items, contributed to destabilizing the industry norm of annual pricing, and caused uncertainty that hasn’t been good for business, promo executives have said. Still, industry-wide distributor sales increased 3.4% in the first quarter. The U.S. economy was up 3.2% in Q1. Despite concerns about deteriorating conditions in the American economy, U.S. employers beat expectations and added 224,000 jobs in June – a big bounce-back following a paltry showing in May.