US Negotiators Headed to Shanghai Next Week for Trade Talks

Date: Friday, July 26, 2019
Source: Sourcing Journal

Trade talks between the U.S. and China are set to resume next week with face-to-face meetings in Shanghai.

Larry Kudlow, the White House director of the National Economic Council, said on Tuesday that the “trip to China” would be a “very good sign.”

The in-person meeting is expected to be led by U.S. Trade Representative Robert Lighthizer. He will be joined by U.S. Treasury Secretary Steven Mnuchin. They will likely meet with Chinese vice premier Liu He. The three were in a round of negotiations back in May before talks broke off suddenly. The U.S. at the time alleged that China was backpedaling on promises it made just as the parties were thought to be close to a final agreement.

A key issue in the negotiations for the U.S. is the protection of intellectual property assets. Following the breakdown of talks, the U.S. imposed a hike in tariffs on Chinese imports known as Tranche 3, raising the duties to 25 percent from 10 percent on $200 billion in Chinese imports.

The Trump administration was planning for an additional tariff of 25 percent on $300 billion of Chinese imports, referred to as Tranche 4, that had been expected to be imposed at the beginning of July. It was a move that had retailers and vendors nervous about the impact on back-to-school and holiday selling seasons. However, an planned meeting between Trump and his Chinese counterpart President Xi Jinping at the G-20 Summit in Osaka on June 29 temporarily tabled the Tranche 4 tariffs so the countries could restart negotiations.

The U.S.-China trade dispute so far has gone on for a year. And while the restart of negotiations is considered a plus for retailers and vendors who hope for a resolution, it’s still somewhat of a problem for planning purposes because the two countries could at any time rescind their truce. And if that happens, Tranche 4 would likely go into effect.

The uncertainty impacts how companies plan their businesses, not to mention the potential for higher prices on the consumer front. Before the truce was announced, many retailers said they would need to raise prices, pass along higher costs to consumers or disrupted scheduled inventory flows. For instance, executives at Lululemon Athletica said they were planning to air ship some merchandise to avoid transportation delays and congestion at the ports.

David French, senior vice president for government relations at the retail trade organization National Retail Federation, has said that NRF is looking forward to continued progress in the talks so “further tariffs can be avoided and existing ones lifted.” He noted that a tariff would punish American consumers and threaten U.S. jobs, noting that a report prepared for the NRF indicated that new Tranche 4 tariffs would cost Americans $4.4 billion each year for apparel and $2.5 billion for footwear.

 

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