As many of you no doubt know by now, the the United States and China yesterday pressed the pause button in their trade dispute. As part of this pause, President Trump has agreed to hold off on increasing tariffs to 25% on $200 billion in Chinese-made goods in exchange for China purchasing a “very substantial” amount of American-made products.
During this pause, which is to last for 90 days, the United States and China will seek agreement on key issues, such as China’s non-tariff barriers, China’s technology transfer policies, China’s lack of intellectual property protection, China’s cyber theft, and more.
Here’s the problem. There is almost no way China will move far enough of any of these issues to appease the United States and if President Trump is to be believed, this will mean the end of the 90 day truce and all bets will again be off in terms of the United States imposing steep tariffs on a wide-range of goods imported from China.
If you believe the trade fight between the United States and China is about money then you should be pleased with this deal and you should believe it will likely stick. But if you believe the trade fight between the United States and China goes to how China treats foreign IP and how China treats foreign companies that seek to do business in China or with China, this pause is little reason for optimism. I will tell you right here that I (and pretty much almost everyone else who deals with China on a regular basis) fall into this second camp.
I got an email today from a company for whom we are working on moving its production from China to Thailand and Vietnam, which said roughly the following:
Just saw that we’ve reached a short-term agreement with China. Great. That gives us a free 90 days, but the way I’m looking at it, this is all it gives us. I don’t think there will be an agreement and even if there is, I don’t care. I’ve had it with China and all the problems we (and everyone else has there). Put us in the large group of companies that will be looking to get out of China no matter what happens. Tired of China. Tired of the price changes. Tired of the tariff wars, which we all know will last years. Thailand and Vietnam just look so much safer for us now. Let’s make that work.
I am not telling anyone to feel as strongly as the above company, but I am saying that you should be sure to use the next 90 days wisely. Towards that end, please check out the following: