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China Trade War Approaching Resolution

By April 30, 2019 January 29th, 2020 No Comments

U.S. Industry Concerned with Trade War Outcome

Monday, April 22 – Americans for Free Trade (AFT), a group of 150 businesses and associations within the U.S., sent a letter to the White House expressing concerns regarding the details of a possible resolve to the U.S. and China trade war.  The first concern states that all tariffs must be lifted upon a resolve being struck between the U.S. and China.  The letter from AFT went further to cite a previous comment from the Administration stating that American businesses must endure “short-term pain for long-term gain” in regards to the tariffs.  The letter states that a failure to remove tariffs will represent a “broken promise to these hardworking Americans”.  The second concern cited in the letter from AFT states that any deal struck with China must address and resolve their “unfair trading practices” in regards to forced technology transfer, cyber theft and intellectual property violations.  The third concern cited in the letter states that the Administration needs to avoid a deal that may result in future tariffs that could prolong the economic uncertainty for American businesses.  The fourth concern states that regardless of the outcome, businesses seeking relief from the tariffs via exemptions deserve clarity in the exemption process.  AFT went further to state that U.S. businesses have been waiting for months for exemptions.  Finally, it was demanded that the Administration do an in-depth analysis of the true costs of the tariffs for the U.S. economy prior to drawing any conclusions about the effectiveness the tariffs had in negotiations.

Approaching Resolve & Tariff Enforcement

According to a recent statement from the White House, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will be in Beijing for negotiations beginning on April 30.  Furthermore, China’s top economic adviser, Liu He, is set to travel with a delegation to Washington for additional talks set to start on May 8.  Both President Donald Trump’s and President Xi Jinping’s administrations have recently been hinting that a deal may be struck soon in the ongoing trade war.

However, top Trump administration officials have hinted that they plan to keep tariffs on $250 billion in Chinese commodities for a longer period of time with no end date specified.  According to President Trump, the reason for keeping tariffs in place for the time being is to ensure China sticks to the deal if/when a deal is made.  Furthermore, a likely resolution of the trade war is the $13 trillion Chinese bond market opening up to foreign investors.  The added income to the local-currency debt in China could very well offset the money lost when tariffs are lifted.  A timeline presented by Goldman Sachs Group Inc. forecasted $135 billion in foreign investments to the Chinese bond market over the next 20 months.  Should a deal be struck with China, and the foreign investments into China’s currency grow at the rate predicted by Goldman Sachs Group Inc., it will take approximately 37 months for the $250 billion in tariffs to be offset.

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