It Isn’t Over till The Decider Decides!
I fear Bike Europe stretched the facts and overreached thereality of the situation November 7, 2019 when it reported: “Trump Tariffs ToBe Phased-Out as US – China Trade War Is To End”.
The respected Dutch based bicycle industry trade publicationreported: “It will bring enormous relief in both the United States as well asin China; this morning it was announced that the Trump Tariffs are to bephased-out. This is to put an end to thetrade war between America and China as well as the heavily raised import dutieson many bicycle products that are imported from China into the U.S.”
The U.S. trade press in the form of Bicycle Retailer AndIndustry News, or BRAIN was silent on the subject and has been up to thiswriting. A wise move perhaps – althoughBRAIN is clearly avoiding its obligation to report and provide an accurateanalysis 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 Englishtranslation of the Chinese Ministry of Commerce is the line that states: “…ifthe first-phase deal with the US is signed, the levies will also be withdrawn,in line with the agreements made.”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 hasneither been completed and committed to a written text, nor agreed to andsigned by the parties. But is also acaution from the Chinese that a first-phase deal has not been signed yet.
Later in the same day the BBC News reported: “Potential USChina trade deal could remove tariffs” and the New York Times reporting: “TheU.S. and China agreed that an initial trade deal would roll back some tariffsplaced on each others’ goods, a big step toward easing tensions.” Emphasisadded.
Please note that I have underlined could and some in theabove paragraph to emphasis them for the reader because by the end of the dayBBC News reported: “Potential US-China trade deal could remove tariffs.”
Most of the world and most businesses at all levels of theglobal supply chain want an end to the China – U.S. trade war, including arollback to the duty levels enforce before the confrontation started. This explains the reception and veryoptimistic and positive interpretation of the Chinese Ministry of Commerceannouncement. The world was ready forand 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 prospectof the trade war being over that its headline to members on November 7 was:“BREAKING: China, US Agree to Phased Tariff Rollback – Apparel Could GoUnscathed”
By now most folks in the American bicycle business know andunderstand that the $7 billion in import tariffs was paid by the importers ofrecord, and it was paid immediately upon the goods clearing U.S. Customs – soit became a part of the cost of goods as they entered the supply chain.
There has been some delay in passing the punitive tariffincrease on to consumers, but this delay has or is about to come to an end, andlike other commodities the full impact of punitive tariffs will show up inconsumer 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 BePhased-Out as US – China Trade War Is To End”. But like so many others it still doesn’t understand the disruptive chaosthat the Decider has at his command.
On Friday, November 8 president Donald Trump: “…toldreporters he has not agreed to roll back tariffs on China.”
International trade watchers have come to understand that itreally 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. sidewill 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 newfigures published by the New York Times are based on an analysis of officialCommerce Department data compiled by Trade Partnership, an economic consultingfirm, and released by Tariffs Hurt the Heartland, a coalition of business andagricultural groups who oppose the tariffs.
[1] “Iam the decider” is credited to president George W. Bush and has not been usedby president Trump. This terminology hasbeen introduced by the author of this HPS Blog post.