Here’s what’s known in the wake of President Donald Trump and China’s Xi Jinping’s meeting during the G20 summit in Buenos Aires: China and the U.S. have agreed to a 90-day truce in the trade war.
What’s still unclear? Just about everything else.
Even Trump’s top advisers appear to be confused, including National Economic Director Larry Kudlow, who told reporters Monday that the truce would begin Jan. 1. The White House later said the 90-day clock actually started ticking Dec. 1, when Trump had a “wonderful and very warm dinner” with Xi on the G20 sidelines
If the Dec. 1 start date sticks and there are no extensions, the truce would expire March 1, 2019, when the U.S. could raise tariffs on Chinese goods from 10 to 25 percent. The increase had been slated to take effect Jan. 1.
Meanwhile, Trump declared on Twitter on Sunday that “China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%.”
And the White House announced Dec. 1 that “China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries.”
But Xi hasn’t confirmed anything and Kudlow on Monday described any potential agreements that had been discussed during the G20 meeting as “commitments.” He cautioned that “commitments are not necessarily a trade deal, but it’s stuff that they’re going to look at and presumably implement,” Bloomberg reported.
Also on Monday, the Wall Street Journal broke the news that in a surprise move Trump had tapped U.S. Trade Representative Robert Lighthizer, a hard-liner on China, to push aside Treasury Secretary Steven Mnuchin and take the reins of the trade negotiations with China.
Logan Finucan, a policy analyst at Access Partnership, a London-based global public policy firm for the tech sector, said the latest developments on the U.S.-China trade front “advances the process and sets a new timer on the outcome, but it doesn’t give us more clarity on what that outcome could be. Everything is still up in the air.”
Burl Finkelstein, executive vice president and general counsel at Kason Industries Inc. in Newnan, Georgia, which makes hardware for refrigeration and food service equipment, supports Trump’s tough approach to trade. But in the wake of the G20 talks, he was concerned that China was “playing the same game of promising action and doing nothing.”
“We’ll have to see what happens in 90 days. Backing down on tariffs gives U.S. manufacturers who are thinking about building capacity back up heartburn,” he added in an email. “They ask, ‘Will tariffs stay and give us back a U.S. market or is this a flash in the pan? Should we borrow money to build capacity on future domestic business or will we see the tariffs relaxed and lose the domestic market before we gain it?’”
While Finkelstein is worried about the domestic market, the situation is likely inducing even more nail-biting for U.S. companies that do business in China. What are they supposed to do in the midst of all this confusion?
Be prepared for the worst, according to several international trade lawyers.
“If I were a company, I’d be looking into alternative supplier arrangements,” said Warren Maruyama, a former general counsel for the U.S. Trade Representative and now a partner at Hogan Lovells in Washington, D.C. “And I’d be trying to get any shipments in before the 90-day period expires.”
Doreen Edelman, partner and chair of the global trade and policy practice at Lowenstein Sandler, also in Washington, is telling her clients to “stay the course” and avoid relying on any unsubstantiated trade-deal noise.
“Diversify your supply chain to the extent that you can and have a plan for if the 25 percent duties come in,” she said. She noted that she has clients who are considering restructuring their manufacturing chains and some are looking to “bring China parts into Mexico.”
“It’s a difficult situation for companies,” she added. “It was not on their 2018 to-do list to spend so much time and money having to address these issues that may or may not benefit the United States economy or consumers at all.”
But it will likely be on their 2019 to-do list.