“Substantial Progress” in Trade Talks
On the evening of Sunday, February 24th President Trump tweeted that the scheduled tariff increase to 25% would be delayed yet again. In his tweet he cites “substantial progress” in trade talks and cited the negotiations as overall “very productive”. The President’s tweet came in stark contrast to U.S. Trade Representative (USTR) Robert Lighthizer’s statements that March 1 would be a hard deadline for the tariff increase.
However, along with a handful of administration members cited progress in the trade negotiations with China. Despite these reports, there has been very little specific detail reported on the situation that may offer businesses some insight into what to expect. Furthermore, USTR Lighthizer testified before the House Ways and Means Committee on Wednesday, February 27th and reflected the same general sentiment from Trump and his administration that “we are making real progress”. Details on the negotiations seem to still be locked up tight despite the reported progress that has been made thus far.
Lighthizer Hints Tariff Exclusion Process
In addition to the general details of progress being made from USTR Robert Lighthizer at last Wednesday’s House Ways and Means Committee meeting, Lighthizer cited China devaluing its currency since the initial 10% tariff came into effect in September of 2018. Furthermore, due to China devaluing its currency, “the effect has been less significant that fully 10%” according to Lighthizer.
However, despite the lack of specifics offered thus far, USTR Lighthizer did commit to having an implemented exclusion process should tariffs rise to 25%. He further reported that the administration is “looking at” an exclusion process for the 10% tariffs that are in place now. Additionally, Representative Jackie Walorski cited a letter at the recent hearing that her and 168 additional Congress members sent to the USTR in October of 2018 which stated the need for an exclusion process. In an attempt to delve for a specific timeline on when a tariff exclusion process would be defined and implemented she went further to cite the most recent spending bill that instructs the USTR to establish an exclusion process for the next round of tariffs within 30 days of its signing.
Despite the recent efforts to gain more insight into the specifics of the tariff timeline, the overarching theme of uncertainty seems to persist. Our insight at BM2 is that it would be wise to proceed as if the 15% tariff hike will eventually go into effect. However, the pressure from Congress combined with Lighthizer’s commitment on having a tariff exclusion process is promising for businesses.
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