Business and general media are today reporting that the Trump Administration has elected to both delay tariffs on a yet to be disclosed, select number of products, as well as eliminate duties on certain others, that were all scheduled to take effect at the beginning of September.
The President indicated to reporters at the White House that he postponed tariffs for the Christmas season in case it had an impact on shopping.
The products being delayed are reported to be smartphones, laptop computers, some select apparel, certain toys and other items. The U.S. Trade Representative’s office has indicated that the listing of specific products to be exempted will be disclosed later today. According to reporting from The Wall Street Journal, such items are expected to be big-ticket items.
Supply Chain Matters Perspectives
This breaking news is obviously welcomed, especially by high-tech and consumer electronics supply networks and perhaps consumer goods networks as well.
We view this development as motivated by two factors.
First, President Trump’s latest threat to impose gradual escalating tariffs on additional $300 billion in China imports in-effect, vastly chilled ongoing trade negotiations among the two nations. Reports have indicated that the three senior Administration members, the Treasury Secretary the USTR and the President’s economic advisor had consulted with the President to not escalate the tensions with such an action. Today’s development may be a gesture to soften the hard stance and get the ongoing talks moving again. Reporting from business network CNBC quotes certain fund managers of the opinion that the U.S. has in-effect blinked and signaled an intent to move the negotiations forward. Both countries have been feeling mounting political pressures and as Supply Chain Matters noted in our prior commentary, multi-industry supply chain management teams have begun to conclude that a protracted trade war will be the norm for quite some time. Over these past few days, global equity markets were reeling on the prospects that the ongoing trade war was reaching a point of very real concerns.
The other factor may well be the lobbying influence for certain high-tech companies.
In explanation the office of the USTR indicated the decision was: “part of the USTR’s public comment and hearing process” that was conducted in June. Judging on past incidences of such testimony, the more likely influence comes from the behind the scenes discussions among the Administration, Congress and powerful industry groups. Do not discount Apple as a likely voice in such behind the scenes discussions.
In either case, today’s news should be viewed as optimistic but by no means finite. In most developments related to the Trump Administration’s thought for the day trade policies, events can change once again. The real milestone comes with the results of the 2020 U.S. Presidential Election as voters determine the economic pain or benefits of an ongoing trade war.
As we opined in our prior blog, with U.S. businesses and retailers showing increased signs of both revenue and profitability erosion and with the effects of higher inbound material costs, many can ill afford risking goals for Q4. Neither does that extend to 2020.
Bob Ferrari
© Copyright 2019, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
Hello Everyone,
We share added information regarding the Trump Administration’s decision to postpone some, but not all, of the threatened new tariffs on mostly consumer goods imported from China.
According to reporting by The Wall Street Journal, the U.S. agreed to postpone until December 15, the 10 percent tariffs on smartphones, laptops, toys, videogames and other products that were schedule to take effect on September 1st. The WSJ estimates that the value of such postponed goods was upwards of $156 billion.
Tariffs on the non-postponed items, which includes tools, apparel and some footwear, will remain effective on September 1st. The WSJ estimate of value for this component is upwards of $107 billion, based on 2018 import data.
The publication cites one official involved in current talks as indicating that U.S. importers had complained that they had already locked-in purchases of seasonal goods and would have had to swallow the cost burden of the added tariffs or pass them along to end customers. The other factor was the high volatility in the U.S. stock market since the news of suspended trade talks.
According to the report, the decision to suspend the tariffs came after a conference call between U.S. and Chinese negotiators, that included Chinese Vice Premier Liu He, USTR Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin. That call was reportedly initiated by the U.S. delegation and the two sides subsequently agreed to meet again in a conference call in two weeks.
A final note, shares of Apple stock rose more than 4 percent on the news of the postponement. Apple was indeed one of the high-tech companies that registered an official complaint regarding the imposition of such a tariff.
Bob Ferrari
Hello Everyone,
In our above commentary reflecting on the delay of certain scheduled tariffs on consumer electronics imports, we pointed to a strong suspicion that the voice of Apple was likely evident in behind the scenes discussions.
Yesterday, Business Network CNBC reported that:
“President Donald Trump likes Apple CEO Tim Cook. But it’s not necessarily because he’s running a big and successful business. Rather, Trump said Cook calls him “whenever there is a problem.””
The report indicates that the Apple CEO joined Trump for dinner during his summer vacation and cites the President as indicating that other corporate CEO’s do not call when they have an issue. According to this report, Trump suggested that Cook directly influenced the Administration’s decision to waive the tariff on cellphones and laptops. (As we suspected)
Cook had argued that the imposition of 10 percent import tariffs on Apple iPhones would have be unfair to the company, especially compared to its prime competitor Samsung, which performs the bulk of its smartphone manufacturing in South Korea and Vietnam.
This CNBC report can be viewed at this web link:
https://www.cnbc.com/2019/08/21/trump-says-apple-ceo-tim-cook-is-a-great-executive-because-he-calls.html
And yes, through its connections and influence with Foxconn, Apple likely has a similar influence with China’s senior leaders.
There is something to be said for diplomacy and savviness in navigating global trade conflicts.
Bob Ferrari