Trade War Updates

In recent months, U.S. companies both on U.S. soil and abroad have experienced worry and concern over an escalating trade war between the United States and the rest of the world.  Most recently, concerns have increased specifically on trade with China.

President Trump, as well as China’s President Xi Jinping have exchanged tariff increases in a fashion of table tennis.  The United States currently is set to levy the latest rounds of tariffs beginning August 30th, these increases will impact nearly all remaining goods imported from China.  China, in turn, continues to evaluate how to return the favor including consideration to restrict U.S. owned entities from fair commerce in China.

Last week, China followed up with an addendum to their filing with the World Trade Organization (WTO) disputing the most recent $200b announced by the U.S.  China contests that the recent release of tariffs violates the United State’s Schedule of Concessions and Commitments annexed to the General Agreement on Tariffs and Trade (1994).  Pending review from the WTO, a dispute resolution process may follow.  President Trump in recent interviews stated “We’re ready to go to 500,” alluding to the fact that we are now proposed to increase tariffs on $450b in goods and there are approximately $505b in total of exports from China.   The Office of the U.S. Trade Representative is planning to hold yet another meeting to consider further tariffs on another $16b in goods from China.

 

On European trade, recent comments from President Trump indicate he would be open to a completely clear and free trade with the European Union.  He Tweeted Monday night “The European Union is coming to Washington tomorrow to negotiate a deal on Trade.  I have an idea for them.  Both the U.S. and the E.U. drop all Tariffs, Barriers and Subsidies! That would finally be called Free Market and Fair Trade!  Hope they do it, we are ready – but they won’t!”  His comments are accurate, free trade between the U.S. and the E.U. would generate tremendous growth and strength in relations between the two trading regions fostering strong economic growth for both.  However, the E.U. currently has significant Tariffs in place on most U.S. manufactured goods and it is unlikely they would consider eliminating.

 

As tensions continue and trade comes to a halt for certain American groups, President Trump has approved relief to help one specific group.  On July 24th, President Trump announced and authorized a relief effort of $12b for U.S. famers who are suffering from recent action on China’s part to stop the importation of U.S. agriculture.  In response to the U.S. announcement of the first round of $50b in Tariffs, China swiftly attacked U.S. agriculture.  The USDA stated “of the total unjustified retaliatory tariffs imposed on the United States, a disproportionate amount was targeted directly at American farmers,”.

 

The aid will be managed by the Farm Service Agency’s Market Facilitation Program, issued in incremental payments.  Also, the U.S. will be creating a Food Purchase and Distribution Program that aims to purchase the excess food and distribute to groups such as food banks and nutritional programs.  Farmers and their representatives are quite happy to hear the news, they also hope to see efforts to expand the markets in which their stock is sold internationally.