US, China Reach “Phase One” Of Trade Deal, Additional Tariffs Set For Dec. 15 Suspended
On December 13, 2019, the U.S. and China reached a “Phase One” of a trade agreement days before the U.S. planned to implement additional tariffs on Chinese imports, prompting the U.S. Trade Representative (USTR) to “suspend indefinitely the imposition of additional duties of 15 percent” that were scheduled to take effect on Dec. 15, as published in the Federal Register on Aug. 20, 2019. See additional Federal Register notice for more details, as published on Dec. 18, 2019.).
Aside from suspending additional duties for List 4B goods that were scheduled for Dec. 15, the U.S. also agreed to reduce duties on List 4A goods from 15 percent to 7.5 percent, which it expects to do in the “near future.”
As part of the Phase One agreement, China agreed to increase its purchases of U.S. agricultural, manufactured and energy products by roughly $200 billion over the next two years. It also committed to improving its protection of “U.S. intellectual property, to curb the coerced transfer of American technology to Chinese firms, to open its financial services market to U.S. firms and to avoid manipulation of its currency,” reported Reuters.
Japan’s Parliament Approves U.S. – Japan Trade Deal
The U.S.-Japan trade deal received approval from Japan’s Parliament. U.S. Trade Representative Robert Lighthizer stated that he expects the President to sign the implementing proclamation for the deal before the end of December.
American beef and other agricultural exports will benefit from lower tariffs under the new bilateral trade deal.
In addition, the U.S. tariff of 2.5 percent on Japanese automobiles remains in place, at least for now. However, it’s expected that Japan will challenge the auto tariff in future negotiations. In addition, there has been disagreement on the legality of the agreement from some members of U.S. Congress, who have lamented that they were not consulted during negotiations and want to know what authority that the administration is relying on to enter the agreement.
France Pushes Back On U.S. Tariff Threat Over Digital Services Tax
The Trump administration is threatening to issue tariffs of up to 100 percent on $2.4 billion worth of French goods as retaliation for a French digital services tax that the U.S. government calls discriminatory.
French sparkling wine, Roquefort cheese, and other goods are among the items identified as possible targets.
According to a statement from U.S. Trade Representative Robert Lighthizer said, “The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets U.S. companies, whether through digital services taxes or other efforts that target leading U.S. digital services companies.”
Ambassador Lighthizer has also remarked in the past that the U.S. Government may consider an investigation into similar taxes imposed by Austria, Italy and Turkey.
Meanwhile, the U.S. has already issued retaliatory tariffs on $7.5 billion worth of EU goods over illegal subsidies associated with European aircraft manufacturer Airbus.
Trump Says That The U.S. Will Impose Tariffs On Steel And Aluminum Imports From Brazil, Argentina
President Trump announced tariffs on steel and aluminum imports from Brazil and Argentina in a tweet on December 2, charging that the two countries “have been presiding over a massive devaluation of their currencies, which is not good for [U.S.] farmers.”
Both countries’ metals exports were targeted by Trump in March 2018, but the tariffs were not imposed after the president granted a permanent exemption.
According to the head of investment strategy at Martin Currie, who was critical of the announcement, “For many Brazilians, this smells like revenge for their country’s soybean farmers bonanza—they have benefited enormously from the U.S.-China trade war by replacing U.S. soybeans sales into China.”
Reuters reports that accusations by Trump that Brazil and Argentina are artificially devaluing their currencies are inaccurate.
U.S. Trade Gap Falls To $47.2 Billion, Lowest Since May 2018
The U.S. trade gap fell 7.6 percent to $47.2 billion in October due to falling exports and imports, but the numbers could also suggest weakening domestic demand.
Statistics from the Commerce Department show that exports of U.S. goods to China posted an increase of 3.4 percent, while imports were unchanged.
However, the trade gap in goods with the EU expanded sharply by 20 percent to $16.4 billion as U.S. imports from the EU surged to a record high.
Commenting on the falling U.S. trade gap, a senior economist at Moody’s Analytics said, “The drop in imports is a double-edge sword. The good news is that it helped narrow the deficit, but it could also signal weakness in domestic demand.”
Federal Lawmakers Urged To Bolster U.S. Infrastructure Legislation
Transportation executives who testified before the House Transportation and Infrastructure Committee on Dec. 5 were united in their call for federal transportation guidelines that “prioritize sustainable funding that enhances freight connectivity and reduces congestion,” reports Transport Topics.
The witnesses also pointed out that because of expanding e-commerce spending and population growth, congestion is worsening.
An executive with the American Association of State Highway and Transportation Officials also emphasized to lawmakers the need to guarantee the long-term solvency of the dwindling Highway Trust Fund.
“The lack of stable, predictable funding from the Highway Trust Fund makes it nearly impossible for state [departments of transportation] to plan for large projects that need a reliable flow of funding over multiple years. And these projects are what connect people, enhance quality of life and stimulate economic growth in each community where they are built,” he explained.
Canada’s Trade Surplus With U.S. Widens
Canada’s trade surplus with the U.S. reached C$5.5 billion in September, which is the largest surplus since the financial crisis of 2008, reported Statistics Canada.
Overall, Canada’s trade surplus improved slightly in October with both imports and exports posting fractional gains.
“Trade remains sturdy and unlikely to add or subtract meaningfully from Q4 growth” said Robert Kavcic, a senior economist at BMO Capital Markets.
Canada’s exports to China are less stellar and posted a decline of 19.3 percent (C$1.6 billion), the largest decline since 2012, as well as the lowest level in over five years.
UBS Global Wealth Management Exec Predicts Global Economic Recovery Ahead
Adrian Zuercher, APAC head of asset allocation at UBS Global Wealth Management’s Chief Investment Office, is forecasting a “significant recovery going into the second half of 2020, particularly in the fourth quarter.”
His comments were made during a recent broadcast of CNBC’s “Street Signs” program. Zuercher said that easing trade tensions between the U.S. and China along with the effect of central banks’ monetary policies would drive next year’s economic recovery.
“We see that the U.S. economy has actually slowed down and we see a relatively good chance that there may be a first phase deal and maybe the December tariffs get pushed out or actually even removed. That should be good enough for the economy to slowly recover,” said Zuercher.
CBP Reports Fewer Seizures Of Fake Goods, But Higher Value In MSRP
A recent report from U.S. Customs and Border Protection (CBP) shows that the agency seized nearly $1.4 billion worth of goods that infringed on U.S. trademarks and copyrights in 2018, up from $1.2 billion in 2017.
While the number of seizures dropped to 33,810 last year compared to 34,143 in 2017, the MSRP (manufacturer suggested retail price) of the seized goods, “had they been genuine,” was responsible for the higher overall value last year.
The report also revealed that:
- Apparel and accessories accounted for the highest percentage of products seized, at 18 percent
- Close behind was footwear (14 percent), jewelry (13 percent), handbags (11 percent), and consumer electronics (10 percent)
- China was the source of 46 percent of seizures (by number of seizures), followed by Hong Kong at 41 percent
- Turkey, India, and Taiwan accounted, in total, for 4 percent of seizures, and all other countries accounted for the remaining 9 percent of seizures
January 31 Due Date For Annual Customs Broker User Fee
The due date for payment of the annual customs broker user fee is Jan. 31, 2020.
The current fee, set by U.S. Customs and Border Protection, is $147.89.
The fee is assessed for each customs broker district and national permit held by an individual, partnership, association, or corporation. It is payable for each calendar year in each broker district where the broker was issued a permit to do business.
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2020 UPS® Tradenomics Webcast Series
All webcast are complimentary
February 6: U.S. Export Compliance Year in Review
Time: 3:00-3:45PM ET
UPS Customs & Trade Compliance and STTAS, a UPS company, will provide the latest information regarding Export Compliance, and provide key insights pertaining to companies who export.
March 12: Update on Brexit
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UPS Europe Customs Affairs and UPS Customs Brokerage will provide an update on Brexit and what is planned ahead.
April 15: Transitioning to USMCA
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UPS Public Affairs and UPS Customs & Trade Compliance will provide an update on what should be expected to transition to USMCA.
May 20: Annual U.S. Trade Policy Update
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Welcome back to our second annual trade policy review that investigates government policies impacting trade. We will also evaluate tools and options available to a trader to take advantage of opportunities or alleviate possible negative impacts\
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