Business and general media are today reporting that the Trump Administration has elected to both delay tariffs on a yet to be disclosed, select number of products, as well as eliminate duties on certain others, that were all scheduled to take effect at the beginning of September.

The President indicated to reporters at the White House that he postponed tariffs for the Christmas season in case it had an impact on shopping. Global Trade Actions

The products being delayed are reported to be smartphones, laptop computers, some select apparel, certain toys and other items. The U.S. Trade Representative’s office has indicated that the listing of specific products to be exempted will be disclosed later today. According to reporting from The Wall Street Journal, such items are expected to be big-ticket items.

 

Supply Chain Matters Perspectives

This breaking news is obviously welcomed, especially by high-tech and consumer electronics supply networks and perhaps consumer goods networks as well.

We view this development as motivated by two factors.

First, President Trump’s latest threat to impose gradual escalating tariffs on additional $300 billion in China imports in-effect, vastly chilled ongoing trade negotiations among the two nations. Reports have indicated that the three senior Administration members, the Treasury Secretary the USTR and the President’s economic advisor had consulted with the President to not escalate the tensions with such an action. Today’s development may be a gesture to soften the hard stance and get the ongoing talks moving again. Reporting from business network CNBC quotes certain fund managers of the opinion that the U.S. has in-effect blinked and signaled an intent to move the negotiations forward. Both countries have been feeling mounting political pressures and as Supply Chain Matters noted in our prior commentary, multi-industry supply chain management teams have begun to conclude that a protracted trade war will be the norm for quite some time. Over these past few days, global equity markets were reeling on the prospects that the ongoing trade war was reaching a point of very real concerns.

The other factor may well be the lobbying influence for certain high-tech companies.

In explanation the office of the USTR indicated the decision was: “part of the USTR’s public comment and hearing process” that was conducted in June. Judging on past incidences of such testimony, the more likely influence comes from the behind the scenes discussions among the Administration, Congress and powerful industry groups. Do not discount Apple as a likely voice in such behind the scenes discussions.

In either case, today’s news should be viewed as optimistic but by no means finite. In most developments related to the Trump Administration’s thought for the day trade policies, events can change once again.  The real milestone comes with the results of the 2020 U.S. Presidential Election as voters determine the economic pain or benefits of an ongoing trade war.

As we opined in our prior blog, with U.S. businesses and retailers showing increased signs of both revenue and profitability erosion and with the effects of higher inbound material costs, many can ill afford risking goals for Q4. Neither does that extend to 2020.

 

 

Bob Ferrari

© Copyright 2019, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.