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News May 31, 2018

U.S. to Announce 25% Tariff on Some Chinese Goods

By  John Corrigan

The détente between the United States and China didn’t last long, as the Trump administration said this week that it will continue pursuing action on trade with China. By June 15, the U.S. will release a list of $50 billion worth of Chinese goods that will be subject to a 25% tariff, CNBC reported. In addition, the U.S. will announce investment restrictions and “enhanced export controls” for Chinese individuals and entities “related to the acquisition of industrially significant technology” by the end of June.

China plans to retaliate by lining up other countries against the U.S. in a pending trade war, The Wall Street Journal reported. Most of the countries would be in Europe and Asia, where companies could benefit from China’s plans to give foreign companies more access to its markets.

It’s a startling turn of events after both countries agreed last week to suspend tariffs against one another while trade talks continued. Although U.S. Treasury Secretary Steven Mnuchin warned that President Trump “can always put tariffs back on” if the negotiations fall through, Commerce Secretary Wilbur Ross is still scheduled to arrive in Beijing on Saturday to negotiate the terms of an agreement in which China would purchase more U.S. agricultural and energy products. However, the U.S. decision to move forward with tariffs has potentially put the agreement in jeopardy.

If a trade war does break out, the promotional products industry would subsequently be in the middle of it. Tariffs on imported Chinese goods have the potential to raise the price of promo items sold in North America, as the vast majority of products available here continue to be produced abroad, particularly in China.

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.

“The potential fallout of the tariff policy includes likely cost increases for a number of different consumer goods and promotional products,” White said. “The tariffs, when combined with the weakening USD to RMB FX rate over the last year, will hurt many suppliers. It underscores the need for relationships with nimble suppliers with diversified manufacturing supply chains.”

Chinese high technology companies are in Trump’s crosshairs due to investment policies that effectively force U.S. companies to give up their tech secrets in exchange for being allowed to operate in the country. In addition to the potential tariffs, the Trump administration is also restricting Chinese investment in American technology firms. In March, Trump fired the first shot by imposing tariffs on up to $60 billion worth of Chinese goods. China has since responded by proposing its own tariffs on $3 billion worth of American-produced fruit, pork, wine and more than 100 other goods.