I fear Bike Europe stretched the facts and overreached the reality of the situation November 7, 2019 when it reported: “Trump Tariffs To Be Phased-Out as US – China Trade War Is To End”.
The respected Dutch based bicycle industry trade publication reported: “It will bring enormous relief in both the United States as well as in China; this morning it was announced that the Trump Tariffs are to be phased-out. This is to put an end to the trade war between America and China as well as the heavily raised import duties on many bicycle products that are imported from China into the U.S.”
The U.S. trade press in the form of Bicycle Retailer And Industry News, or BRAIN was silent on the subject and has been up to this writing. A wise move perhaps – although BRAIN is clearly avoiding its obligation to report and provide an accurate analysis of the fluid U.S. – China trade situation in a timely manner.
What happened between November 7 with the announcement by the Chinese Ministry of Commerce that the “…two countries have agreed to phase-out the existing import duties” and Friday November 8 was – The Decider[1]
The first thing that sticks out to HPS in the English translation of the Chinese Ministry of Commerce is the line that states: “…if the first-phase deal with the US is signed, the levies will also be withdrawn, in line with the agreements made.”
The word “if” is a logical way to refer to a deal that has neither been completed and committed to a written text, nor agreed to and signed by the parties. But is also a caution from the Chinese that a first-phase deal has not been signed yet.
Later in the same day the BBC News reported: “Potential US China trade deal could remove tariffs” and the New York Times reporting: “The U.S. and China agreed that an initial trade deal would roll back some tariffs placed on each others’ goods, a big step toward easing tensions.” Emphasis added.
Please note that I have underlined could and some in the above paragraph to emphasis them for the reader because by the end of the day BBC News reported: “Potential US-China trade deal could remove tariffs.”
Most of the world and most businesses at all levels of the global supply chain want an end to the China – U.S. trade war, including a rollback to the duty levels enforce before the confrontation started. This explains the reception and very optimistic and positive interpretation of the Chinese Ministry of Commerce announcement. The world was ready for and thought that the U.S. and China were about to do the right thing!
The same day, November 7 the New York times reported that the U.S. had collected $7 billion in import tariffs during the month of September, representing the most the U.S. had ever brought in as the punitive tariffs on Chinese imports had become in full force and effect. U.S. tariff revenue increased 9-percent from August and was up over 59-percent from the previous year[1]. The sharp rise in U.S. tariff revenue was driven by a new 15-percent punitive tariff that was added on consumer goods that went into effect Sept. 1. The Wall Street Journal reported on November 7 that 69-percent of all U.S. imports from China were covered by punitive, or additional tariffs in September 2019, and increase of 38-percent from the previous month.
No wonder the Sourcing Journal was so giddy at the prospect of the trade war being over that its headline to members on November 7 was: “BREAKING: China, US Agree to Phased Tariff Rollback – Apparel Could Go Unscathed”
By now most folks in the American bicycle business know and understand that the $7 billion in import tariffs was paid by the importers of record, and it was paid immediately upon the goods clearing U.S. Customs – so it became a part of the cost of goods as they entered the supply chain.
There has been some delay in passing the punitive tariff increase on to consumers, but this delay has or is about to come to an end, and like other commodities the full impact of punitive tariffs will show up in consumer prices in the form of increases.
Bike Europe, like so many others, wanted to believe the U.S. – China trade war was about to be over when it said: “Trump Tariffs To Be Phased-Out as US – China Trade War Is To End”. But like so many others it still doesn’t understand the disruptive chaos that the Decider has at his command.
On Friday, November 8 president Donald Trump: “…told reporters he has not agreed to roll back tariffs on China.”
International trade watchers have come to understand that it really doesn’t matter what the Chinese negotiators or the Ministry of Commerce, or the U.S. negotiators say – the final word and all decisions on the U.S. side will be made by and come from – The Decider!
HPS will keep up with the twists and turns of U.S. – Chinese trade negotiations and provide strategic opinion and advice to clients and provide current reports on this Blog.
Jay Townley
Resident Futurist
[1] The new figures published by the New York Times are based on an analysis of official Commerce Department data compiled by Trade Partnership, an economic consulting firm, and released by Tariffs Hurt the Heartland, a coalition of business and agricultural groups who oppose the tariffs.
[1] “I am the decider” is credited to president George W. Bush and has not been used by president Trump. This terminology has been introduced by the author of this HPS Blog post.
