Promo Industry Responds To Phase One U.S.-China Trade Deal

On Friday, the U.S. government announced that it had reached a “phase one” trade deal with the Chinese. While final terms of the agreement have not yet been announced, it is expected that China will implement certain structural reforms and commit to purchasing U.S. exports, while the U.S. has canceled or cut certain tariffs.

As a part of this deal, the U.S. canceled a 15-percent tariff on imported goods on List 4(b) that was expected to go into effect on December 15. In addition, the administration announced the phase one deal would cut some of the tariffs already in place—while items on Lists 1-3 would stay at 25 percent, the items on List 4(a) would be reduced from 15 percent to 7.5 percent.

“Although the phase one deal that was announced last week is a positive step forward, the list of products within the promotional products industry that will receive a reduction in tariffs is relatively few in number,” says Tom Goos, MAS, president of Kirkland, Washington, distributor Image Source, Inc. “The good news is it covers some large categories like t-shirts, outerwear, pens and pencils. The reduction from 15 percent to 7.5 percent is significant. However, this current deal does not cover the substantial duties of 25 percent on $250 billion in products that include categories like bags, drinkware and tech items. Overall, this is great momentum, but I would not make any assumptions that this trade war is over or even on a path to resolution based on this announcement.”

The final shape of the deal is not yet known, as no formal trade agreement has been published and discrepancies exist in public statements made by both sides. Reportedly, China will revise regulations in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange, and agree to purchases of U.S. goods and services. China also canceled existing tariffs on U.S. corn, automobiles and other products.

“While we are still waiting to see the full details published in the Federal Register, the news impact for our industry is mixed because many items are still subject to tariffs,” says Larry Whitney, director of global compliance at supplier Polyconcept North America. “There have been no changes to the Section 301 Lists 1, 2 and 3 tariffs of 25 percent. The elimination of the List 4(b) tariffs is nice, but most items still carry tariffs and will continue to be subject to them until a ‘phase two’ agreement can be reached with China.”

Discussions on a phase two trade agreement, which would presumably include the rolling back of further tariffs, is expected to begin as soon as phase one is signed.

Whitney adds, “Any thaw in the trade war is good for our industry. Suppliers are still facing huge costs for tariffs on goods from China though. Until a peace in this trade war is declared, our industry will continue to see higher costs for goods from China.”

filed under December 2019 | Tariffs
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