Month: December 2019

As we are learning more about the Phase One trade deal with China, it’s important to keep in mind this is only a small step forward. The vast majority of the tariffs are still in place. To put this in perspective, in October 2019 Americans paid $4.1 billion in additional taxes because of the tariffs put into place by the Trump Administration. Under Phase One, American businesses and consumers would still have paid $3.4 billion in tariffs, or just 17 percent less than before. That leaves 83 percent of the tariff costs still in effect. 

And from the initial glance at the deal, it doesn’t look like Phase One will address many of China’s structural changes that started the trade war. As Bloomberg’s Shawn Donnan wrote in yesterday’s Terms of Trade:“The text won’t be available until next month at the earliest. But it does appear that, when it comes to structural reforms, two years of economic warfare managed to extract little more than a codification of existing commitments by the Chinese.”
Phase One Doesn’t Undo the Economic Damage Caused by the Trade War

After manufacturing contracted for the fourth month in a row, Timothy Fiore, Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee said: 
“Global trade remains the most significant cross-industry issue.”

As reported in The Hill, tariffs continue to threaten American jobs.
“President Trump’s trade war is putting 1.5 million U.S. jobs at risk, according to a study commissioned by the Port of Los Angeles, the nation’s largest container port. ‘Very simply put, less cargo means less jobs,’ said the port’s Executive Director Gene Seroka at a Washington, D.C., press conference.”

An unfortunate example of this comes out of Sharon, Pennsylvania. 
“In spite of her efforts, Never Enough Yarn has become a casualty in the international trade war. Infante said she’s closing her Sharon shop mainly due to tariffs slapped on Chinese yarn.”

CNBC reported that the trade war with China has resulted in a steep drop in U.S. exports of the product and caused the hardwood industry to cut jobs.
“Workers at Northwest Hardwoods’ mill in Mount Vernon, Washington, don’t have much time left on the job. The mill is set to be shuttered in November, and all 70 jobs gone. The Tacoma, Washington-based company, which is one of the largest producers in North America, is also closing a plant in Virginia, cutting an additional 30 jobs, and is then laying off 30 more at the corporate level.”

Phase One Doesn’t Relieve the Tax Burden on Most American Businesses, Farmers and Consumers

Phase One has done nothing to ease the burden the trade war has created for companies impacted by Lists 1-3, including Misco Speakers that has been impacted by List 3. According to NPR:
“The Misco speaker company in St. Paul, Minn., is celebrating its 70th anniversary this year. But the company’s future is uncertain — a result of the trade war between the U.S. and China.”

The same is true of New Hampshire small business owner Darryl Meattey, who has items on both List 3 and List 4A4 – so he will continue to pay the tariffs. 
“For the last 40 years, I’ve run a cold-weather accessory business in Troy. Our small business generates about $3 million to $5 million in annual sales, and we have anywhere from eight to ten employees. We’re what people would call a real ‘mom and pop shop,’ and it’s owned and operated by us…But tariffs are slowly driving us out of business.”

And as the Wall Street Journal reported on Columbia Sportswear, who has items on Lists 3 and 4A and will also continue to pay the tariffs, is having to raise prices on customers: 
“‘It’s a massive expansion of taxation on American employers and consumers,’ said Peter Bragdon, chief administrative officer of Columbia Sportswear Co., whose firm had many apparel items hit in the latest tranche of tariffs. The company has notified customers that they would have to raise prices on many of those items, he said.”

Phase One Doesn’t Correct the Uncertainty the Trade War Continues to Cause

A recent Reuters report highlighted some of the uncertainty created by the trade war and the tariffs that were already in place – and will remain in place under Phase One. Win Cramer, the president of JLab Audio summed it up succinctly:
“The uncertainty makes it nearly impossible to make mid- to long-term business decisions. We have to make really short-term decisions almost week by week by week, because that’s how quickly it’s changing.”

Dan Digre, an American speaker manufacturer in Minnesota outlined how the uncertainty is stifling growth. 
“It just seems wrong. We’re not creating anything new. We’re spending all this time and money trying to deal with a problem that’s more or less self-inflicted.”

Steve Lamar, the executive vice president of the American Apparel & Footwear Association, whose members will continue to pay additional taxes because of tariffs under Phase One, explained how this uncertainty hurts his industry:
“We are drowning in uncertainty. This guessing game is chilling investment, putting hiring plans on hold, and sowing sourcing chaos throughout our industry.”

Phase One Doesn’t Reverse or Halt the Significant Damage Done to 2020 Swing States

In Ohio, businesses and farmers are paying huge sums of additional taxes each month: 
“From the start of the trade war in February 2018 to July 2019, Ohio paid over $1 billion in tariffs — and you can thank the president for that. On top of that, Ohio’s farmers and small businesses have faced $599 million in retaliatory tariffs from China, making it harder for them to sell their goods there.”

Adam Schweers, a small-business owner and former Mayor of Carroll, Iowais also feeling the sting of tariffs: 
“Iowans have paid $186 million in additional tariffs since this back-and-forth with China started back in February of last year. Even more concerning, we’ve faced $386 million in retaliatory tariffs – or tariffs China has slapped on American exports to their country – which has significantly hurt Iowa farmers. Farmer bankruptcies are on the rise and exports are on the decline. That spells bad news for Iowa’s economy long-term.”
 Angela Carr, co-founder of Turbie Twist, which is headquartered outside Pittsburgh, Pennsylvania, recently told POLITICO the tariffs are making her reconsider her decision to vote for President Trump in 2020.“It would break my heart to have to make a change, but this is my livelihood. I have to make choices that are best for my family and the families of our team.”

WASHINGTON, December 12, 2019 – Today, the Trump administration announced that a Phase One deal has been reached. As a part of this deal, the United States will cancel a 15 percent tariff on additional goods imported from China that were expected to go into effect on December 15th. In addition, the administration announced the Phase One deal would cut some of the tariffs that are already in place. While the items on Lists 1-3 would stay at 25 percent, the items on List 4A would be reduced from 15 percent to 7.5 percent. Americans for Free Trade, a coalition of more than 150 associations from every sector of the economy that are united in the fight against tariffs, released the following statement from spokesperson Jonathan Gold in response to today’s announcement.

“The decision to cancel the List 4B tariffs and the announcement that the Phase One deal will cut some tariffs already in place is a small step forward. However, the tariffs still in place are a tax that Americans – and not China – continue to pay, to the tune of tens of billions of dollars. And by only reducing the tariffs on a few items, the administration is picking winners and losers in this trade war. In the month of October alone, Americans paid almost $2.7 billion in additional taxes because of the tariffs on Lists One through Three. That’s why we urge the administration to continue to work diligently to come to a final agreement with China that will remove all of the tariffs currently in place.”

BACKGROUND

Americans Have Paid An Additional $42 Billion In Tariffs From The Start Of The Trade War In February 2018 Through October 2019, Including An Additional $4 Billion In October Alone. (“Trade War Has Cost Americans Additional $42 Billion, Including $4 Billion in October Alone,” Tariffs Hurt the Heartland, 11/6/19)

In The Month Of October Alone, American Businesses, Farmers and Consumers Paid Almost $2.7 Billion In Additional Taxes Because Of Tariffs On Lists One Through Three. (“Trade War Has Cost Americans Additional $42 Billion, Including $4 Billion in October Alone,” Tariffs Hurt the Heartland, 11/6/19)

“Job Growth Is Slowing This Year…In Part Because Of The Nearly 16-Month Trade War Between The United States And China.” “Job growth is slowing this year, averaging 167,000 per month compared with an average monthly gain of 223,000 in 2018, in part because of the nearly 16-month trade war between the United States and China, which has undermined business investment.” (Lucia Mutikani, “U.S. October job growth beats expectations despite GM strike,” Reuters, 11/1/19)

Small Business Owner In New Hampshire: “Tariffs Are Slowly Driving Us Out Of Business.” “For the last 40 years, I’ve run a cold-weather accessory business in Troy. Our small business generates about $3 million to $5 million in annual sales, and we have anywhere from eight to ten employees…And we sell our products to some of the biggest stores in the country, like Saks 5th Avenue, Bloomingdale’s and Lord & Taylor. But tariffs are slowly driving us out of business.” (Darryl Meattey, “Tariffs Are Slowly Driving Me Out of Business,” The Concord Monitor, 11/25/19)China’s Retaliatory Tariffs Caused One Georgia Lumber Business to Lose Almost $900,000 A Month In Exports. “Breaking up with China cost Jim Howard a sizable chunk of his business. The split wasn’t by choice, but triggered by government policy. His Mableton business, AHC Hardwood Group, had grown its exports of fine hardwoods to China to about $1 million a month. That crashed to less than $100,000 after China slapped tariffs of 5% to 25% on American wood in 2018 in retaliation for President Donald Trump’s tariffs on $360 billion of Chinese goods.” (Christopher Quinn, “Georgia’s towering wood industry whipsawed by U.S. trade war with China,” The Atlanta Journal Constitution, 11/191/9)

WASHINGTON, D.C. — Today, Americans for Free Trade, a coalition of more than 150 associations from every sector of the economy that are united in the fight against tariffs, sent a letter to President Trump and strongly encouraged the Administration to suspend implementation of the Tranche 4B tariffs set to take effect on December 15th if a Phase One deal is not finalized before then. 

“We think it is incredibly important for the ongoing negotiations to be allowed to continue without the specter of new tariffs taking effect before a deal is signed,” the Americans for Free Trade coalition wrote. “As you noted when the Tranche 4B tariffs were announced, you delayed implementation of those tariffs specifically to avoid harming American consumers over the holidays. This delay should be extended until a deal is reached.”

The coalition also called for the elimination of existing tariffs as part of the Phase One deal. Since the trade war began, Americans have paid an additional $42 billion in tariffs, according to Tariffs Hurt the Heartland. In addition, American businesses and farmers have faced $12 billion in retaliatory tariffs. 

“Further, we strongly support using the Phase One deal to include reciprocal elimination of existing tariffs, as has been reported in the press,” the Americans for Free Trade coalition wrote. “Such an action would send an important economic signal while providing immediate relief to job creators throughout the U.S.”

A copy of the letter can be found here.

WASHINGTON, December 2, 2019 – For the fourth straight month, the U.S. manufacturing industry has contracted and experts agree that the trade war and tariffs are the primary culprit for this continued weakness. Americans for Free Trade, a coalition of more than 150 associations from every sector of the economy that are united in the fight against tariffs, released the following statement from spokesperson Jonathan Gold in response to today’s ISM Manufacturing Report: 

“It’s no secret the trade war is doing significant damage to American manufacturing. Today’s report is more proof that we need both sides to come together and agree to a final deal as quickly as possible that ends the trade war and lifts these tariffs that are hurting American manufacturers, businesses and workers.”
 

BACKGROUND

Institute For Supply Management Chairman Timothy Fiore: “Global Trade Remains The Most Significant Cross-Industry Issue.” (November 2019 Manufacturing ISM Report on Business, Institute for Supply Management, 12/2/19)

Manufacturing Dropped In November. “The November PMI® registered 48.1 percent, a decrease of 0.2 percentage point from the October reading of 48.3 percent. The New Orders Index registered 47.2 percent, a decrease of 1.9 percentage points from the October reading of 49.1 percent.” (November 2019 Manufacturing ISM Report on Business, Institute for Supply Management, 12/2/19)

Manufacturing Constricted For The Fourth Month In A Row In November. “November was the fourth consecutive month of PMI® contraction, at a faster rate compared to the prior month. Demand contracted, with the New Orders Index contracting faster, the Customers’ Inventories Index remaining at ‘too low’ levels and the Backlog of Orders Index contracting for the seventh straight month (and at a faster rate). The New Export Orders Index returned to contraction territory, likely contributing to the faster contraction of the New Orders Index.” (November 2019 Manufacturing ISM Report on Business, Institute for Supply Management, 12/2/19)

“Manufacturers Have Borne The Brunt Of The U.S. Trade War With China.” “Big picture: Manufacturers have borne the brunt of the U.S. trade war with China. The dispute between the world’s two largest economies have disrupted global supply chains and contributed to a broader global slowdown.” (Jeffry Bartash, “U.S. manufacturers still suffering from China trade fight, tepid global economy, ISM finds,” MarketWatch, 11/1/19)

“Job Growth Is Slowing This Year…In Part Because Of The Nearly 16-Month Trade War Between The United States And China.” “Job growth is slowing this year, averaging 167,000 per month compared with an average monthly gain of 223,000 in 2018, in part because of the nearly 16-month trade war between the United States and China, which has undermined business investment.” (Lucia Mutikani, “U.S. October job growth beats expectations despite GM strike,” Reuters, 11/1/19)

Mark Zandi, Chief Economist At Moody’s Analytics: “President Trump’s Trade War Is Doing Significant Damage To The Economy.” (Martin Crutsinger, “US economy grows at modest 1.9% rate in third quarter,” Associated Press, 10/30/19)

Diane Swonk, Chief Economist At Grant Thornton: Uncertainty Created By Tariffs “One Of The Biggest Weights On The US Economy.” “Businesses don’t know where to place their bets and don’t know where to invest when they don’t know where the next tariffs are going to come from. That’s been one of the biggest weights on the U.S. economy.” (Scott Horsley, “As Growth Slows, The Economy Is Falling Short Of Trump’s Target,” WGBH, 10/30/19)

Economists Predict Trade War “Will Shave About A Half-Percentage Point From Already Slower GDP Figure.” “Growth last year was boosted by Trump’s $1.5 billion tax cut passed in 2017 and billions of dollars in extra government spending approved last year. Without that support, economists had forecast a slowdown this year. They also say that Trump’s trade war with China, by disrupting supply chains and hurting business confidence, will shave about a half-percentage point from the already slower GDP figure.” (Martin Crutsinger, “US economy grows at modest 1.9% rate in third quarter,” Associated Press, 10/30/19)