Did Trump’s phase one deal with China deliver the goods for retailers?

President Trump and Chinese Vice Premier Liu He at the signing of the U.S. China Phase One Trade Agreement - Photo: The White House
Jan 16, 2020

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.”

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?

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"Phase two will need to remove the tariffs, strengthen the intellectual property terms and address the issue of the Chinese funding of private companies, a tall order."

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15 Comments on "Did Trump’s phase one deal with China deliver the goods for retailers?"

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Jeff Sward

This feels like a desperate grab for a good news headline in a highly charged political environment. It doesn’t feel like it gives us all a molecule of additional predictability. No sigh of relief. This has not been a productive roller coaster ride, and a stable, good news outcome is nowhere near a given. Unless…

Richard Hernandez
Richard Hernandez
Director, Main Street Markets
2 years 4 months ago

Both sides of the aisle are happy about the outcome of this and so far it looks like farmers (at least in Texas) are happy about the agreement. But remember, this is step one of a long road to re-develop a positive trade situation with China. It is a win for both countries.

Paula Rosenblum

“The trade war won’t be over until the tariffs are gone.” Yup. That says it all.

Harley Feldman

The phase one deal accomplished some progress with the Chinese on trade. The trade relationship between the countries is complex, strained and has been one-sided in favor of the Chinese for many years. More complexity and tough negotiations remain for phase two but progress has been made on making trade more equitable. Phase two will need to remove the tariffs, strengthen the intellectual property terms and address the issue of the Chinese funding of private companies, a tall order.

April Sabral

The problem is not knowing what will come next. It’s hard to say as he’s not very predictable, it depends on how he feels. Watch Twitter for an update!

Stephen Rector

What hasn’t been reported during this time of uncertainty and unease is the amount of time and energy companies have had to spend on creating multiple scenarios and “whatifs” – what if the tariffs go up 20 percent versus 15 percent, what can we absorb vs. pushing the cost to the customer etc. While you can’t quantify the cost of the stress on a team to do this type of exercise, it has caused hours of frustration for many. Eliminate the tariffs and that is one less thing people have to worry about in an already volatile industry.

Gene Detroyer

Of course the signing of the phase one trade agreement was a positive step for American consumers, retailers and vendors. It is better off than we were yesterday. But we are still very far off from where we were before the trade war started. I would be pleased if we got back to pre-trade war relations in phase two, but I doubt it will happen. China gave up nothing in phase one that they hadn’t already passed in the People’s Congress last February to be implemented this month.

And, some of those things are going to make it easier for foreign companies to do business in China. If so, watch more manufactures move to China to open operations.

Tony Orlando

I know I am in the minority on this panel, but this is a first step on a longer time table to level this awful playing field, and it will get better. China has had the upper hand for years, and that is starting to change, which is about time. More work needs to be done, and a lot of good stuff on trade has already gotten done, and my 401K is heading in the right direction. Made in America means a lot to me, and more goods being made here is never a bad thing.

Mark Heckman
First, let’s dispell the notion that the so-called “trade war” will ever be over between the U.S. and China. China has been in a trade war with the U.S for many years exemplified by significant tariffs and restrictions imposed by the Chinese on a number of critical U.S. export commodities prior to the recent retaliations by the U.S. The differences in our cultures and world views will very likely perpetuate some level of tension between our two countries for many years to come. With that said, the current phase one agreement, which isn’t even being discussed publicly in China, is bound to be an improvement for American farmers, retailers and tech companies given this deal reduces the uncertainty of continued investment in China. The deal contains an array of safeguards protecting patents, trade secrets and pirated goods being injected into the pipeline. This deal, coupled with the recent bipartisan passing of the new USMCA trade deal significantly reduces barriers for the U.S to better compete for business with our three most important trading partners. Compliance… Read more »
Doug Garnett

Good of them to sign this. But it’s only a start. For Trump to claim any kind of victory from imposing big tariffs then making them a little less big is pretty disingenuous.

Ryan Mathews

Trade chaos is always only a tweet away. There will be a boost in some sectors, like agriculture, but much of this will still not compensate for sales that have already been lost. And there isn’t tremendous relief (yet) in the consumer goods sector. Since at any moment the Administration can claim that they caught the Chinese “cheating” on the deal and that they are therefore “forced” to withdraw, who can say what the real impact of phase one will be? Color me VERY skeptical that this is the relief branders, retailers, and consumers have been looking for.

Peter Charness

Until we get policy based on strategy and leave the world of twitter behind, who knows what comes next? Seems to be heading in the right direction, but frankly I can’t tell if we’re really much better off than we were 18 months ago.

Craig Sundstrom

At this point, of course, we’re entirely dependent on predictions … and one’s faith in the competence of this administration. I’ll leave it there.

Ken Morris

Phase one is a positive step but as was said on Kai Ryssdal’s NPR’s Marketplace last night, “show me the money” from this deal. We need to stop the tariff madness. We are losing to countries in South America, Europe and other Asian countries as China looks to source much needed product. We are in a global economy and the sooner we realize that, the better we will be as retailers, farmers and consumers.

James Tenser

Partially unravelling a poor policy decision does not, in my opinion, constitute a great victory for American retailers. But we should take what we can get for now and look for firther ways to dial down the tension with China. Theft of intellectual property remains a sore point. Perhaps the present thaw is an indicator that progress is possible.

"Phase two will need to remove the tariffs, strengthen the intellectual property terms and address the issue of the Chinese funding of private companies, a tall order."

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