Phased Easing Of Sino US Trade Relations: US Postponed Tariffs On Some Clothing, Shoes And Cap Products

On the evening of August 13th, Member of the Political Bureau of the CPC Central Committee, vice premier of the State Council, and Liu He, the leader of the Sino US comprehensive economic dialogue. Tender agreement American trade representative lettse , Finance minister Mnuchin Conversation. The Chinese side made solemn representations on the US side's tariffs on goods exported to China in September 1st. The two sides agreed to call again in the next two weeks.

Meanwhile, the US trade representative's office said it would postpone the 10% tariff imposed on China's computers, video game consoles, toys, computer monitors and some footwear and clothing products originally scheduled for September 1st to December 15th.

Which goods exported to the US have been delayed by tax increases?

List of tariff added products coming into force in September 1, 2019

List 4A – Effective September 1, 2019

List of tariff added products coming into force in December 15, 2019

List 4B – Effective December 15, 2019

US Trade Representative Office (USTR) In this statement, tariffs on some products will be postponed to December 15th, including "computers, video game consoles, certain toys, computer monitors, and certain footwear and clothing products".

It is understood that in August 14, 2019, USTR issued the fourth batch of 300 billion dollar tax list adjustment, divided into three parts: medical, safety and other reasons to exclude about 1% of the commodities.

The tax date for mobile phones, laptop computers, game consoles, some toys, computer monitors, some clothes, shoes and hats and so on has been postponed to December 15th, and the remaining 40% of goods are still taxed at September 1st.

according to Everbright Securities For the main commodities (US imports from China over US $2 billion), we have postponed a relatively small number of non knitted or crocheted garments and accessories, optical instruments and equipment, knitted or crocheted garments and accessories.

Sino US trade friction has not fundamentally improved.

CITIC Securities pointed out that some commodities were temporarily suspended tariffs. The reason given by the United States was to take into account the negative effects of some commodities tax increases on national security and residents' health. But the main reason is that the US relies heavily on China and has a greater negative impact on American consumers.

According to the analysis, it is better than "market expectations" to suspend tariffs on some commodities, but it is not a fundamental improvement in trade frictions between China and the United States. First, in the medium term, the US has few cards in the field of trade. Secondly, the increase in marginal tariffs on the United States is obvious, and the trade conflicts will not be out of control. Most of the commodities suspended this time depend on the US's dependence on China's supply, or mainly processed by American multinational companies in China. However, this tax increase list and pace adjustment are the active adjustment of the US side based on their own ability, not the fundamental improvement of the Sino US trade frictions.

Extended reading

Brand and retailer conservatively view the future of US apparel industry in the next 5 years

The mainstream position of Chinese suppliers is difficult to shake.

Recently, the American fashion industry association released the 2019 American fashion industry benchmarking research report, and surveyed the latest strategies of apparel brand retailers and retailers in the field of purchasing and management. The report shows that In the context of escalating trade tensions and increasing uncertainty in the US and the world economy, American fashion companies' expectations for the future development of the US garment industry in the next 5 years are conservative compared with a year ago.

According to the survey of the surveyed enterprises, the number of companies with "optimism" or "relative optimism" has dropped from 84% in 2018 to 64% this year. Meanwhile, 25% of the companies surveyed were neutral in the next 5 years, and the proportion jumped from 4% in 2018 to 25%.

Asia is still the main source of procurement.

At present, The strategy of "China + Vietnam + other countries" is still the most popular purchase mode in terms of the source of imports of products. However, the proportion of specific purchases is constantly changing. At the same time, American fashion companies continue to adjust their procurement and procurement categories. In 2019, the fashion companies interviewed were purchased from 48 countries or regions. Among them, China (100% procurement rate), Vietnam (86% procurement rate) and India (86% procurement rate) ranked the top three. The whole of Asia is still the main source of procurement in the United States. However, China is no longer the sole largest supplier of fashion companies in the United States. About 25% of companies said that their purchases from Vietnam will exceed China in 2019, which is a new trend worthy of attention.

In the survey, Most companies say they will continue to maintain relatively diversified sources of procurement. In 2019, 57.1% of the companies purchased in more than 10 different countries or regions. 82.9% of the companies said they plan to keep the number of sourcing sources unchanged or increase over the next two years. However, due to the needs of different companies, there is a polarized development for increasing or decreasing the number of suppliers. 42.9% of the companies plan to increase the number of suppliers, and 51.4% of the companies plan to reduce the number of suppliers.

Purchasing costs in alternative countries are on the rise

The US launched the "301 survey" against China, which has greatly affected the purchasing strategies of American fashion companies. These companies are deeply concerned about the tension in the US China Trade and the negative impact on its business. Because of the trade diversion effect, American fashion companies are accelerating the reduction of purchases from China. About 83% of the companies expect to reduce the number of purchases from China in the next two years, an increase from 67% in 2018.

The "301 survey" has pushed up the price of clothing imports in the United States and made the "production and procurement cost increase" a major challenge facing American buyers in 2019. As many as 63% of the companies expressly stated that the "301 survey" imposed tariffs on China "increased the purchasing cost of the company in 2019". The average price of clothing imported from the United States rose by more than 20% in May compared with the same period in 2019, as the company transferred the procurement to the countries such as Bangladesh, Vietnam and India.

There are signs that The "301 survey" not only did not bring significant benefits to the us from the Western Hemisphere and local procurement, but on the contrary increased the production cost of "made in the United States" textile and clothing. If the Sino US economic and trade frictions continue to escalate, American companies may have to raise their retail prices.

The mainstream position of Chinese suppliers is difficult to shake.

The survey also showed that Despite the continuing economic and trade frictions between China and the United States, China will remain the main supplier of textile and apparel in the United States in the foreseeable future. Although 83% of the companies expect to reduce procurement from China in the next two years, only 6.7% of the companies expect to substantially reduce purchases from China. As far as textile and clothing categories are concerned, China has few competitors.

Considering the market reaction speed, procurement cost, flexibility and agility, compliance risk and other factors, China is also one of the few sources of "balanced capability" that American companies can choose. About 50% of the respondents said their cooperative Chinese suppliers were able to cope with the tight trade situation by lowering orders and keeping orders.

As US companies plan to reduce procurement from China, Vietnam and Bangladesh have gained the importance of being the supplier of clothing to the United States. This year, Vietnam is still the second largest source of procurement for the companies surveyed, and 86% of the companies purchase from Vietnam. However, only about 7% of respondents plan to increase clothing purchases in Vietnam in the next two years, reflecting the company's concerns about the limited capacity and procurement costs of Vietnam. In addition, Bangladesh is the sixth largest source of procurement, and the purchase rate of the companies surveyed is 60%. In the next two years, 80% of the companies expressed interest in increasing procurement from the country, a record high. Despite the price advantage, respondents still believe that Bangladesh has low competitiveness in terms of market response speed, flexibility and agility, compliance risks and so on.