'Nobody Knows What the Deal Is': 90-Day Tariffs Agreement Leads to More Uncertainty, Not Less
The ongoing trade negotiations between the U.S. and China have been a difficult back and forth, to say the least. It started with tariffs, retaliations, more tariffs, more retaliations and the constant threat of ratcheting up penalties. President Trump has made China a cornerstone issue of his candidacy and later presidency, labeling the country a "currency manipulator" and repeatedly taking aim at what he called unfair trade practices.
Yesterday, the president said that negotiations with China are underway, and that he'd hold off on increasing tariffs from 10 percent to 25 percent, giving the two parties 90 days to reach an agreement. When we initially reported on it, we noted that it brings a "measure of stability" to what has been a tenuous situation. Then came this series of tweets, in which President Trump hinted that should the negotiations fall apart, he was not afraid of imposing tariffs, labeling himself a "Tariff Man":
There are a few inconsistencies and uncertainties here. According to the Washington Post, the U.S. and China came out of negotiations with different expectations and notes, and China was apparently surprised at the way the deal was announced. President Trump claimed that China would "reduce and remove" tariffs on U.S. automobiles, but his aides said yesterday that China hadn't committed to that.
"Nobody knows what the deal is," one top White House advisor told the Washington Post on the condition of anonymity.
In a trade note, JPMorgan wrote that "it doesn't seem like anything was actually agreed to at the dinner, and White House officials are contorting themselves into pretzels to reconcile Trump's tweets (which seem if not completely fabricated than grossly exaggerated) with reality."
So there are a few possibilities here:
1. Talks with China are indeed progressing, and the 90-day negotiating window is reason to be optimistic that we're nearing a long-term resolution to the trade war.
2. We're putting the cart before the horse, so to speak, and saying the two countries committed to things that weren't fully ironed out just yet, but could be.
3. This is all just posturing, and we're in for more tariffs and a continuing icy relationship with China.
For the promotional products industry, the tariffs and changing trade climate with China would obviously make a difference, but folks in the industry aren't quite sure about what's going to happen, and that causes a bit of understandable apprehension.
Bill Keller, business consultant at Printing and Marketing Buying Group, Ephrata, Pa., said he's personally not fully convinced that the deal will come to fruition.
"My guess is that it will probably fall through," he told Promo Marketing. "This has been a long time coming."
That belief inspired him to move some of his sourcing from China to India.
"I could see some of the currency wars that, you know, when President Trump was talking about China being a currency manipulator, currency wars often move to trade wars," Keller said. "And so, there's a lot of posturing here, but I think this is a long process. This is not going to be once-and-done-and-over. This trade war with China has a long way to go yet, and so my guess is that it will fall through."
Matt Wagner, vice president of sales for Fields Manufacturing, St. Cloud, Minn., has a bit more faith in the two countries' negotiation abilities.
"I believe the 90-day trade truce is an optimistic sign that negotiations are open," Wagner said. "However, there is still much uncertainty where those terms will land."
He added that any potential tariff, and therefore increased cost, would force the industry to adapt accordingly.
"In instances such as this, passing along substantial increases is inevitable, ultimately effecting the end-customer," he said. "Buyer marketing budgets are not likely to be increased as a response to inflating costs in our industry, but instead will buy more strategically themselves."
Keller said that the effects aren't just limited to negatively impacting items affected by the tariffs. It could potentially create demand for unaffected products positively. This, of course, comes at the expense of another product group, though.
"Once people see a product gets more expensive, they'll gravitate toward another product where they can get more value for their money," he said. "So, the people who are heavy into that backpack or whatever else is going to get hit by that particular tariff, are going to be affected."
For now, while we are dealing with a lot of variables, Wagner said the best thing is communication.
"In an environment of price uncertainty, sales and marketing professionals need to flex their communication skills in order to avoid buyer distractions and abandoned sales rates," Wagner said. "The speed at which we're able [to] exchange information sets us apart from our competitors, and can be the difference between closing or losing a sale."
As always, we'll keep you posted on how things progress.