The coming change of control of the US House of Representatives from the ruling Republicans to the opposition Democrats will probably do little to stop the escalating tariff disputes between the US and China, the American fashion industry has been warned.
Erin Ennis, vice president of the US-China Business Council, told industry representatives in New York that American businesses should get ready for the imposition of Section 301 tariffs on all remaining goods coming from China – including apparel.
Speaking at the 30th Apparel Importers Trade & Transportation Conference last week, one day after the mid-term elections in the United States brought news of a pending shift of control over the lower house of Congress, Ennis was part of a relatively pessimistic China trade consensus at the gathering.
Indeed, some 90% of respondents to an online poll held at the event predicted that the dispute between the US and China will continue “for the foreseeable future, or at least through the end of 2019,” said Julia Hughes, president of the United States Fashion Industry Association (USFIA), which holds the conference each year in conjunction with the American Import Shippers Association (AISA).
“The dispute between the US and China will continue for the foreseeable future, or at least through the end of 2019” – Julia Hughes, president of the United States Fashion Industry Association (USFIA)
Ennis took note of reports of ongoing talks between the US and China – the two largest economies in the world – being staged to resolve the dispute, which has seen the US impose Section 301 tariffs on more than US$250bn of Chinese goods, with the Chinese hitting up US$127bn of US products in retaliation.
“The two numbers did not equal because we don’t export much to China,” she explained, adding that anecdotal information seems to indicate that some US companies have experienced problems doing business in China.
She noted: “There’s no agreement in place despite all of these rounds of talks,” adding: “As this goes along, it will be perfectly clear why US companies are having difficulties in China. I think you should hope for the best, but as companies you should be planning for the worst.”
For his part, David Spooner, a partner at Barnes & Thornburg LLP and former chief textile and apparel negotiator in the office of the US Trade Representative (USTR) office, surveyed the changes that will be coming in the post-electoral political landscape.
The election means Democrats will command up to a 20-seat majority of the House of Representatives from January, while Republicans will retain their control of the Senate, and “turned out pretty much the way the pundits had predicted.” The incoming chairman of the House Ways & Means Committee, which is key to approval of trade and other financial measures, is Richard Neal (Dem, Massachusetts), who is “fairly good on tax and trade issues, so we’ll be talking to a friendly face,” said Spooner.
But beyond that, he predicted the change in political alignment in the US will do little to change the trade dynamic, particularly when it comes to President Donald Trump and his dealings with China.
“It’s highly unlikely that the House will move to rein in the President’s tariff authority and his 301 tariffs,” he said, predicting that the upshot of the political change may prove to be investigatory in nature. “The House is likely to hold hearings into the product exclusion process, the process by which the White House decided to impose steel and aluminium tariffs, and Commerce Secretary [Wilbur] Ross’s census decisions [he is demanding respondents reveal information about their citizenship] and stock holdings” [he has been told by ethics officials to sell privately-held shares].
In the short term, ahead of the shift of Congressional control, the lame duck Congress will need to pass a new budget resolution by 7 December, with most government departments, including the US Customs and Border Protection (CBP) and the Department of Commerce, set to shut down unless this is accomplished. “It will be extremely hard to fund the government in fiscal year 2019 and fiscal year 2020,” he suggested.
In addition, there is the chance that the tariff war could escalate significantly from the New Year. “There’s now some US$250bn in tariffs on imports from China to retaliate against China’s IP [intellectual property] policies and practices,” which became effective through 24 September. “When Trump announced the latest tariffs in September, he took everybody by surprise when he said they might go up to 25% in January.”
Of course, surprises associated with President Trump could also lead to disputes being resolved. Occurring between now and then is a meeting between Trump and Chinese President Xi Jinping on the sidelines of the G20 summit in Buenos Aires on 1 December. “I don’t discount the possibility that the President will meet with President Xi of China and declare victory and the tariffs will go away,” said Spooner.