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U.S. and China Near Deal That Could End Most U.S. Tariffs

The U.S. and China are close to a trade deal that could lift most or all U.S. tariffs as long as Beijing follows through on pledges ranging from better protecting intellectual-property rights to buying a significant amount of American products, two people familiar with the discussions said.

Chinese officials made clear in a series of negotiations with the U.S. in recent weeks that removing levies on $200 billion of Chinese goods quickly was necessary to finalize any deal, said the people, who weren’t authorized to talk publicly about the deliberations. That’s the amount the Trump administration imposed after China retaliated against the U.S.’s first salvo of $50 billion in tariffs that kicked off the eight-month trade war.

One of the remaining sticking points is whether the tariffs would be lifted immediately or over a period of time to allow the U.S. to monitor whether China is meeting its obligations, the people said. The U.S. wants to continue to wield the threat of tariffs as leverage to ensure China won’t renege on the deal, and only lift the duties fully when Beijing implemented all parts of the agreement.

As part of the ongoing talks, the U.S. asked the Chinese not to retaliate or bring World Trade Organization cases in response to U.S. tariffs that could be imposed to enforce the deal, according to a person familiar with the negotiations.

Stocks in Europe and Asia advanced on optimism about a deal, with the Stoxx Europe 600 Index rising 0.4 percent. The offshore yuan gained 0.2 percent.

Dates for a summit between President Donald Trump and counterpart Xi Jinping have yet to be agreed, according to officials from both countries who declined to be named. The Wall Street Journal, which reported earlier that the U.S. and China were close to finalizing a trade pact, reported the summit could happen around March 27.

Plans for a signing ceremony have been complicated by Xi’s need to lead China’s annual National People’s Congress and to make other foreign trips.

U.S. and Chinese officials “have conducted fruitful and intensive consultations and made important progress on many issues of common concern,” Zhang Yesui, a spokesman for the National People’s Congress, the annual session of China’s legislature, told reporters in Beijing on Monday. “We hope that the two sides will continue to hold consultations and reach a mutually beneficial and win-win agreement,” he added.

China’s Offer

China is offering to lower tariffs on U.S. farm, chemical, auto and other products, the Journal said, citing people familiar with the situation. Specifically, China would buy $18 billion in natural gas from Houston-based Cheniere Energy Inc., one of the people familiar with the matter said.

As part of a deal, China is pledging to speed up the timetable for removing foreign-ownership limitations on auto ventures, and to reduce tariffs on imported vehicles to below the current rate of 15 percent, the newspaper reported.

A senior administration official cautioned on Sunday that a decision had not yet been made over lifting the U.S tariffs. The official also said a debate was continuing inside the administration with Trump unlikely to make a decision before a deal was closer to being done, likening to situation to the debate over what to do with U.S. sanctions in the lead-up to last week’s summit with North Korea’s Kim Jong Un.

Asked during a congressional hearing last week whether a deal would see a lifting of U.S. tariffs, Robert Lighthizer, the China hawk now leading the talks with Beijing, would say only that was China’s desire.

Source: Bloomberg.com

china usa

China-US trade war tariffs force manufacturing moves

The failure of the US and China to agree on trade at the weekend makes further tariffs on Chinese goods to the US seem increasingly likely.

But while most economists agree that trade wars are ineffective and harmful, some players in the logistics industry are seeing opportunities – mostly in air freight, which typically benefits from chaos and change.

The likelihood of 25% tariffs on a wide range of goods has seen the ocean freight industry surprisingly busy in the past couple of weeks, as exporters look to move goods to beat the 1 January deadline.

But ultimately, shippers and logistics service providers are looking to new manufacturing possibilities – and therefore supply chains – in South-east Asia.

Large numbers of US companies are talking of shifting manufacturer. Robert Rucker, CEO of The Tile Shop, said in an October earnings call: “With the Chinese tariffs, we are looking at moving. And right now: we’re at roughly 50% of our product coming out of Asia, my goal is to get that closer to 25% or even lower, and the potential for doing that right now is very good. We’re not waiting.”

James Simms, CFO of Vicor Corp, said in his earnings call: “The cost, going forward, may not be inconsequential, given the volume of components currently sourced from China. We are seeking non-Chinese alternate vendors.”

And Todd Bluedorn, CEO of Lennox International: “I’m not sure the Chinese tariffs are going to be short term. And so we’re taking action to sort of avoid the tariffs by moving to South-east Asia and other low-cost countries that can meet our requirements.”

It will take a while for companies to build new supply chains, and in the meantime carriers are already benefiting.

“It is the peak for China to the US, but it’s compounded by tariffs,” said Robert van de Weg, vice president sales and marketing for Volga-Dnepr Group. “There is a build up.

“A lot of this inventory was supposed to go by ship, but it’s going by air to be on time.

“If tariffs have a general effect on the economy and trade flows, there will be some change before it settles down into the new equilibrium.”

The question for carriers will be when to add capacity – and to where.

“South-east Asia could see new trade flows, Cambodia, Malaysia, Vietnam, Indonesia and Bangladesh,” said Mr van de Weg. “There will be more opportunities out of South-east Asia and a degree of chaos, as the supply chains won’t be ready. Plus, factories will have to move. However, I don’t believe the change will be sharp and sudden.”

AirbridgeCargo (ABC) is the V-D group’s Asia specialist and is currently looking at developing its South-east Asian network.

“We are looking at increasing the frequencies and maybe opening new markets. You don’t want to be too early, you don’t want to be too late. Don’t miss the boat, but don’t lose your shirt. You need to be prepared to go in. Increasing frequencies to existing points is the first step.”

ABC currently operates to Ho Chi Minh, Hanoi, Singapore and Taipei.

Mr van de Weg added: “Bangladesh is interesting. We have made progress on ACC3 certification there. We also think Indonesia and Thailand have potential. There is more and more infrastructure and more overland networks with Cambodia and Vietnam, and there is also a strong import market.”

Air freighter volumes appear to be rising in the region, with Thailand seeing international volumes this year above the market average growth, at more than 6%.

Cambodia’s Phnom Penh saw 24% growth, year on year, in cargo volumes in September. The Vietnamese civil aviation authority is forecasting 18% growth annually in freight volumes each year up to 2020.

Source: The Loadstar