A Reason For Optimism On the Trade Battle with China

A Reason for Optimism on China – by John Marshall, Janel’s Director of Customs Brokerage Services

Last week I attended the Agriculture Transportation Coalition’s Annual Meeting in Tacoma, WA. Here’s what I learned on behalf of our customers and staff:

Erin Ennis, Senior Vice President of the US-China Business Council and recognized expert on US-China trade relations, gave the keynote address at the event. Ms. Ennis provides extensive China-Focused advisory and advocacy service to US companies, calling on her prior experience working for Kissinger McLarty Associates, the international consulting firm headed by former Secretary of State, Henry Kissinger.

In Ms. Ennis’ view, the new tariffs have had no impact on the Chinese economy. While the tariffs did not bring China to the negotiation table, the Trump Administration has gotten some strong commitments from China on the items listed in the initial proposal.

Ms Ennis pointed out that, even before the Trump administration took over, U.S. – China Trade Policy was due for a “reset”. In 2017 the U.S. gave China a “comply or die” proposal containing very specific demands, demands far beyond what China would possibly agree to. Last August China expressed their willingness to discuss the proposal. There were 142 different items, of which 30-40% China would probably agree to, another 30-40% were at least negotiable and 20% were unacceptable to China.

Despite what’s been seen in the news and trade, real progress has been made. If they wanted, each side could declare victory and move on. It is hoped that at the Group of 20 meeting this month, there could be a framework agreement put in place. One key concern, however, is the longer it takes to finalize an agreement, the greater the market share lost on both sides. Market shares will definitely see some shifts.

If a trade deal is reached, there are real opportunities for U.S. exporters. Some of the China commitments could increase the competitiveness of U.S. products. The deal allows for $1.2 trillon in exports over the next 6 years. It is questionable if the U.S. can even produce that quantity of exports to China.

The risk of this “Trade War” is the danger of it contributing to the triggering of a recession in quarters 3 & 4 of 2019. The reward could be a positive shift in the trade balance and new market opportunities for U.S. exporters.