Right now it would appear as though a trade agreement has been reached by the U.S. and China at least for now. Donald Trump and Xi Jinping declared a trade truce at G20. During a negotiation in Argentina, the two have come together and produced a pause in the tit for tat financial fight that has been happening. This is very important for Donald Trump who made this particular trade policy a central part of his presidential platform. There are allegations that China has stolen U.S. intellectual property and as a result, tariffs have continued to increase back and forth in a trade war. For now, it seems that war is on hold.
The Facts on What You Need to Know
President Donald Trump has agreed to delay the 25% tariff increase that was previously proposed for the next 90 days. As of late, both parties have agreed that for the next 90 days they will continue to seek some better form of permanent resolution.
At present, tariffs are at 10% and will remain at 10% if a negotiation can be reached at the end of the 90-day period. If it cannot then the 10% will be increased to its original level of 25%.
More Details on the Deal
The White House stated that the deal took place because the Chinese president agreed to concessions that Donald Trump had previously demanded. Purportedly in exchange for placing a pause on the increase of 25% the Chinese president will stop exports to the United States of a synthetic opioid called Fentanyl and it will put an end to the death sentence for convicted traffickers.
It was also determined that China would start purchasing agricultural products from American farmers, increasing the previously decreased imports of United States soybeans and farm products from farmers in the Midwest, resolving the previous retaliatory action taken by China to decrease consumption of U.S. farm goods.
Much of this deal is beneficial to President Trump who receives a large amount of his political support from farmers in the midwest. It is important to be cautious as the agreements that have been implemented are simply that: agreements. The next 90 days will serve as a test during which time these agreements may or may not come to fruition. The actions that are taken by both parties over the next 90 days will determine what financial changes face the shipping industry in the future of 2019.
How and Why the Deal Was Made
At the summit, the two individuals got together and worked out a compromise. It is important however to be cautiously optimistic. An earlier deal was already struck with China and President Donald Trump tore it up. Now since he negotiated this deal himself he will be much less likely to personally try to torpedo the deal because that would hinder his own reputation. Still, it could happen.
How Shippers Should Prepare
Shippers should be cognizant of delays and increased tariffs. It is not a guarantee that things will continue to remain placid and that no future taxes will be placed on any shipments from Asia which means that shippers need to prepare now to take advantage of the next 90 days during which time increased costs will not apply.
The Benefits this Truce Represents for Shippers
Shippers can benefit right now from the current stagnation. At present, the amount of increased fees that shippers are dealing with is 10%. For at least the next 90 days it will remain at 10%. This means that the truce represents an opportunity to potentially thwart a serious increase in fees and subsequent issues to business operations.