Fashion Intel & Analysis
Last week, a new study released by Tariffs Hurt the Heartland and The Trade Partnership found that October 2018 was the highest tariffed month in U.S. history, with U.S. businesses paying $6.2 billion in tariffs. This was double the amount paid in October 2017. Furthermore, it’s clear the tariffs are not achieving the Administration’s stated goals. U.S. imports subject to new tariffs declined by 0.6% in October, while U.S. exports subject to retaliation fell 37 percent. The study is available on the Tariffs Hurt the Heartland website.
Last week, South Korea’s National Assembly ratified the revised U.S.-Korea Free Trade Agreement, which was signed by both parties in September. According to reports, this was the final step required to implement the agreement in South Korea. The Office of the U.S. Trade Representative tweeted, “Great news today! Korea’s National Assembly approved our update to our KORUS FTA. This improved deal is a great achievement for our nations and workers.” According to our sources at USTR, the Administration is hoping for implementation by the end of the year; stay tuned for the Presidential Proclamation and Federal Register notice. The agreement will still be called the U.S.-Korea Free Trade Agreement (KORUS).
As a reminder, the outcomes of the revised agreement are available on the USTR website.
In other news from the G20 Summit, the United States, Mexico, and Canada signed the U.S.-Mexico-Canada Agreement (USMCA), otherwise known as the new North American Free Trade Agreement (NAFTA). Now, the ball is in the U.S. Congress’s court to approve the trade agreement. The positive response to the signing of the new agreement was short-lived because later in the trip President Trump said he will terminate NAFTA “within a relatively short period of time” to pressure the Congress to approve USMCA. This now introduces new uncertainty in the U.S.-Canada-Mexico trading relationship.
You may remember that the President can terminate NAFTA with a six-month transition. However, as we previously reported, it’s highly unlikely Congress could act as fast as the President wants. Even if the Administration can get support from a majority in the House and the Senate, there simply is not enough time for the Congress to approve USMCA during the lame-duck session. The current Congress ends on January 2nd, which allows just 34 days to pass it; under the terms of Trade Promotion Authority, the President must submit the final legal text to Congress after signature and then wait a minimum of 30 days before submitting draft implementing legislation.
House Ways & Means Committee Chairman Kevin Brady (R-TX) said, “There is no doubt that President Trump has delivered on his promise to obtain many provisions that will increase our ability to sell more American goods and services. But as I’ve said throughout the negotiations, for USMCA to gain widespread support, it must increase certainty as to the durability of the agreement, be fully enforceable to hold our trading partners accountable across all sectors, and increase–not diminish–our ability to sell into these markets.”
Meanwhile, a partial government shutdown looms, as funding for several government agencies expires on December 7th and lawmakers are divided over President Trump’s $5 million request for a border wall; it’s expected that lawmakers will approve a one-week budget to delay until after President George H. W. Bush’s funeral services. The Department of Homeland Security, and Customs and Border Protection, would be affected if there is a shutdown and we will keep members updated as the talks progress.
The U.S. Department of State just released the Report on Serious Human Rights Abuses or Censorship in North Korea, which finds that the Government of the Democratic People’s Republic of Korea (DPRK or North Korea) continues to censor the media and commit serious human rights violations and abuses, including violations of individuals’ freedom of expression. There is no independent domestic media in the country, and all media are strictly censored. No content that deviates from the official government line is tolerated. In addition, the State Department identifies three individuals and three groups as responsible for serious human rights abuses or censorship. In conjunction with the report, the Department of the Treasury has added three North Korean persons to the Specially Designated Nationals and Blocked Persons list. The announcement and report are available on the State Department website.
Related, the U.S. Department of Homeland Security will be refreshing the FAQ document on the North Korean labor provisions in the Countering America’s Adversaries Through Sanctions Act (CAATSA). DHS has contacted stakeholders, including USFIA, to provide input on additional questions you would like addressed or existing questions you would like clarified. We will be holding a call on this topic in conjunction with USFIA Social Compliance & Sustainability Partner BSI in the coming weeks; stay tuned for the announcement.
As you’ve probably seen, over the weekend, President Trump and President Xi announced a “cease fire” in the trade war following their meeting at the G20 Summit in Argentina. According to the White House, the tariffs on the $200 billion list (List #3) will remain at 10 percent and will not increase to 25 percent on January 1st. As a reminder, this list included many products of relevance for USFIA members, including some textiles, accessories and handbags, plastic hangers, and other items. The United States and China will “immediately” begin negotiations on structural changes with regard to forced technology transfer, IP protection, non-tariff barriers, cyber intrusions and cyber theft, service, and agriculture, and “agree that they will endeavor to have this transaction completed within the next 90 days. If at the end of this period of time, the parties are unable to reach an agreement, the 10 percent tariffs will be raised to 25 percent.” The full statement is available on the White House website.
This agreement is generally good news and we hope that it is the beginning of serious negotiations on all these issues. On the negative side, however, USFIA had heard from sources in the Administration that the Administration would likely implement a product exclusion process after the tariffs increased to 25% in 2019. The Administration’s decision to delay an increase in the China Section 301 tariffs almost surely means that the Administration will also delay implementation of a product exclusion process
Due to the unpredictability of the trade politics, we encourage companies to continue to prepare for the possibility of increases in the current tariffs as well as the future possibility of additional tariffs on all imports from China. Visit our webinar library to access our webinar series, How to Fight the Trade War, with insights from customs brokers and lawyers. We are waiting for more details about how the Trump Administration will handle these negotiations and will send updates as soon as we have more clarity.