Did Trump’s phase one deal with China deliver the goods for retailers?
The U.S. and China signed an agreement yesterday that will see the two countries dial back, at least temporarily, some punitive trade measures that have hurt businesses and consumers.
Referred to as phase one, the deal will see the U.S. reduce tariffs on Chinese imports on a wide range of consumer products, including consumer electronics and footwear, from 15 percent to 7.5 percent. For its part, China has agreed to increase imports of agricultural products and other goods and services by an additional $200 billion “based on market conditions” over the next two years.
A recent study from the U.S. Federal Reserve found that the Trump administration’s imposition of trade tariffs on China and other countries has led to job losses, particularly in the manufacturing sector, and higher producer prices, which have been passed on to American consumers.
Groups representing retailers were supportive of the phase one agreement but were clear that more needs to be done.
“The trade war won’t be over until all of these tariffs are gone,” said Matthew Shay, president and CEO of the National Retail Federation, in a statement. “We are glad to see the phase one deal signed, and resolution of phase two can’t come soon enough.”
The Retail Industry Leaders Association (RILA), which represents the largest retailers in the U.S., issued a similar statement.
“While this agreement offers some relief, retailers ultimately want a long-term deal that rolls back all tariffs and provides the kind of certainty and predictability needed to plan and invest while operating in a global economy,” said Blake Harden, vice president, international trade, RILA. “Leading retailers urge the administration to conclude the phase two negotiations quickly to get us to that goal.”
The Trump administration has positioned the signing of the phase one agreement as a significant economic win for the country, but many others remain skeptical.
“Overall uncertainty is not reduced much because there is no removal of existing tariffs [and] questions whether China can buy the quantities of goods and services the administration wants,” John Frisbie, an expert in Chinese trade with Hills & Co., told The Wall Street Journal.
“Given the numerous deals that have been reached and then breached in the past two years, we are also skeptical,” said Roger Johnson, president of the National Farmers Union. “And without more concrete details, we are deeply concerned that all of this pain may not have been worth it. Not only has this trade war cost farmers billions of dollars worth of sales to China, but it has also bruised our reputation, making other trading partners reluctant to work with us.”
- Phase One: Economic and Trade Agreement Between The United States and The People’s Republic of China – The Wall Street Journal
- Retailers welcome phase one trade deal with China but say remaining tariffs must end – National Retail Federation
- RILA Statement On Phase One China Trade Deal – Retail Industry Leaders Association
- Disentangling the Effects of the 2018-2019 Tariffs on a Globally Connected U.S. Manufacturing Sector – Divisions of Research & Statistics and Monetary Affairs Federal Reserve Board
- First Phase of U.S.-China Trade Deal Finalized – National Farmers Union
- U.S., China Sign Deal Easing Trade Tensions – The Wall Street Journal
- U.S. and China tiptoe around holes in new trade agreement – Reuters
- The $95 Billion Centerpiece of the Trade Deal Is Already In Doubt – Bloomberg/Yahoo Finance
DISCUSSION QUESTIONS: Do you see the signing of the phase one trade agreement as a positive step for American consumers, retailers and vendors? What will need to happen in phase two to make the pain caused by 18 months of trade wars pay off?