by Chris Sevcik, Director of International Trade Services
The United States and China have agreed to move forward with the phase one trade deal. As both sides continue to negotiate the final details of phase one, no new tariffs will be implemented. The deal is expected to be signed by both parties in January.
The postponement of the tariffs was expected by most observers. Neither side wanted to implement the newest round of tariffs as it would impact virtually every product made in China including electronics and toys during the Christmas buying season in the United States. Businesses on both sides of the Pacific are eager to see a signed trade deal in the near future and welcome the postponement of tariffs.
Key points of the phase one trade deal include: a reduction of existing tariffs, increase agriculture sales to China and discussing enforcement of intellectual property. Keen on coming to an agreement soon, China and the United States are working on addressing these matters in preparation for a final signing in January. We will be posting updates as this story develops.
By Chris Sevcik
The question on everyone’s mind is: when will the current US-China trade dispute end? The answer is no one knows for sure, but many scholars believe that a broad trade agreement is not likely before the 2020 US presidential election. China experts believe that China feels that President Trump is not a reliable trade partner, and President Trump will want to look tough on China while campaigning. The United States does not want to allow more technology to be transferred to China to fuel its economic and geo-political rise. China will be meeting with the US in early October to talk; however should no deal be accomplished and the dispute continues forward, it is likely that more tariffs will ensue. This will impact companies regardless if tariffs are targeted towards their industry.
Without a firm trade agreement in sight, understanding how the situation started, what has transpired since and how this has shifted global supply chains is crucial for every business. While some companies may have been impacted by this shift already, it is vital to understand how it is unfolding to ensure that your company will prosper in years to come.
The current trade dispute has been going on for well over a year, but one of its core issues has been impacting business for decades. With a population of over one billion and an expanding economy, China has been an attractive area for business expansion for many US firms. In order to enter into the Chinese market, some international companies have been willing to make sacrifices including transferring technology to Chinese partners or disclosing confidential information for product approval needed to sell within China.
One of the original core issues of the current US-China trade dispute is safeguarding US intellectual property in future years. While most individuals in the US may not feel the impact of the loss of intellectual property, it has impacted business. According to a CNBC Global CFO survey, 22% of respondents indicated that their company has been a victim of IP theft from China within the past year.
It is hard to determine if intellectual property will be concluded with the current trade dispute; however, for some companies this may not be an issue as they explore different markets. The length and severity of the trade dispute is altering supply chains. From manufacturing to agriculture, global supply chains are adapting to the current situation.
Companies should understand how global supply chains have been altered to best determine their future path. No matter if an organization is supplying to farmers in the US or manufacturers in China, global supply chains are changing and understanding where your future customers are located will ensure your success.