As we indicated in our previous blog covering the tariffs on imported goods, meetings did take place last week between U.S. and Chinese officials regarding the trade war and the tariffs. Slowly but surely, it appears that both sides are making progress. We have summarized the relevant points from these meetings below:
- The additional 5% tariff that was going to be effective October 15 is now off
- The December 25% to 30% hike will still take effect
- The “deal” made consists of three phases:
- Phase 1: Phase 1 was completed last week as the U.S. and China came to a deal on IP, financial services, and ‘big’ agricultural China agreed to make $40-50 billion in agricultural goods purchases. Progress was made on currency and foreign exchange issues as well as tech transfer. The deal will take 4-5 weeks to get written.
- Phase 2: Phase 2 will likely involve a reprieve of the 5% hike on tariffs on Chinese imports that is currently set to take effect in December.
- Phase 3: This phase will hopefully consist of a complete repeal on all tariffs.
- There is an Apex Summit taking place in approximately 4 weeks where the deal from Phase 1 will be signed and negotiations on Phase 2 will take place.
- Xi and President Trump will be meeting at the G20 Summit on November 30.
The events of the past week have been positive in our view regarding the trade war and tariffs. While we have no line of sight to meaningful financial relief from the tariffs, last week was the first indication of long-awaited progress in the trade negotiations. Companies of all sizes are affected by these tariffs, particularly small businesses. Hopefully this momentum of progress continues into the holiday season positioning everyone for breakthrough progress in early CY2020.
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