Fashion Intel & Analysis
As you have seen in the press, on Sunday President Trump used Twitter to complain that the trade negotiations with China are going too slowly and that the U.S. will increase the tariffs on Tranche 3 products from 10% to 25% later this week. He also said that “shortly” he will impose 25% tariffs on all U.S. imports from China. This is a reversal from the optimism last week that we were close to a deal.
Just to recap, on Friday Administration officials said they were pleased with the progress in the trade talks, following meetings in Beijing led by U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. The lead Chinese negotiator, and Chinese Vice Premier Liu He, were scheduled to be in Washington for talks later this week, and many thought that the final deal would be announced on Friday. Instead there is the threat that duties on many consumer products included in the Tranche 3 of the 301 retaliation will jump to 25% on Friday. And this morning there are reports that the Chinese Vice Premier is no longer going to accompany the Chinese delegation to D.C.
What happened? Some observers suggest that the President’s tweets confirm that the two sides are close to a deal and the Administration wants to be able to claim that the tariffs are the reason. And they think that they may be able to get a few additional concessions from China as part of the deal. Others think that the President is moving away from the deal and that he believes the strong economic numbers for the U.S. economy mean that the Administration can take a tougher position. This raises another question – does the President really think the tariffs are paid by China and are helping the economy? If yes, that is bad news for the deal. One final guess is that President Trump may want to delay the final agreement until the two leaders – Trump and Xi – meet later this month.
Honestly right now no one knows, but we will be watching closely for the next update.
Press reports this week suggest that we are getting close to a major trade deal between the U.S. and China. The final deal is expected to include commitments for changes to Chinese intellectual property rules and forced technology transfer requirements, as well as a big increase in Chinese purchases of U.S. exports, especially agriculture and natural gas. There also will be a new level of enforcement tools to ensure that China changes its policies and lives up to the agreement.
The biggest question now – will the U.S. remove the tariffs imposed on imports from China. While we expect that the Trump Administration will leave some of the tariffs in place, it looks likely that Tranche 3 – the ten percent tariffs that affect quite a few consumer products – will be removed when the deal is signed. But … don’t start celebrating quite yet. There still is a lot to finalize – including when and where President Trump and President Xi will sign the deal. We are cautiously optimistic and will keep USFIA members informed as the negotiations continue.
The return of 245 officers to the ports of entry at the border over the last three weeks are having a positive impact on the cargo wait times, according to Executive Assistant Commissioner Todd Owen at U.S. Customs and Border Protection (CBP). On today’s southern border operational update call, Owen said that this week the peak wait times at El Paso are down to 90 minutes, Laredo down to 60, and Otay Mesa is down to 3 hours, a significant decrease from last week. Owen says CBP will continue to make additional adjustments to bring down the wait times more and mentions good trajectory in terms of cargo processing along the border including no new cargo closures this week. The final wave of 75 officers to be pulled from airports, seaports, and northern borders is on May 12th resulting in CBP’s anticipated end state of 245 officers from the southwest border and 345 from airports, seaports, and northern border assisting with border patrol. However, Owen says migrant crossings are unlikely to decrease and CBP is looking at how to deal with the situation longer term.
Another sign that the Trump Administration is serious about approving the U.S.-Mexico-Canada Agreement (USMCA), or NAFTA 2.0, was just released by the Office of the U.S. Trade Representative. A series of Fact Sheets that promote the achievements in the new USMCA are now posted on the USTR website. Overall the Administration says that the agreement will modernize trade between the U.S., Canada and Mexico – with major improvements in intellectual property rights protection and stronger enforcement provisions.
There is a Fact Sheet dedicated to the benefits of the textile and apparel provisions. The Administration says the new requirements in USMCA will encourage companies to use more Made in the USA fibers, yarns and fabrics by limiting some of the flexibility available in NAFTA. In the USMCA, garments claiming the duty-free benefits will be required to have USMCA inputs such as sewing thread, pocketing fabric, narrow elastic bands and coated fabrics.
USTR also highlights the benefits from the increases in the de minimus levels for imports to Canada and to Mexico, expanded labor and environmental commitments and other enforcement measures. The Fact Sheet on Modernizing NAFTA is available here and the Fact Sheet on Rebalancing Trade to Support Manufacturing is available here.
As you know there has been a lot of opposition to the Trump Administration’s decision to remove India and Turkey from eligibility for duty-free benefits under the Generalized System of Preferences (GSP). The Coalition for GSP just released a comprehensive report that analyzes the negative impact on the U.S. economy and on jobs if GSP is taken away. The 22-page report includes economic analysis as well as company profiles about a range of companies that rely on the GSP program. Among the companies in the report are two consumer product companies using GSP for imports from India -- Randa, which imports accessories such as belts and wallets, and dZi Handmade, which imports jewelry and other artisan products. If you are affected by the possible loss of GSP, it is not too late to contact your Members of Congress. Let USFIA know and we can help you send that message.