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REUTERS/Kevin Lamarque

Tariffs: China And US Resume Talks This Week

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REUTERS/Kevin Lamarque

After three months of tariffs imposed on an estimated value of $300 million of goods, the United States and the Popular Republic of China have agreed to meet this week.

The news came right after Apple shared bleak results and that many analysts forecast a recession for the global economy in 2019.

playbook 2019

China’s commerce ministry’s website declared that “the goal of the upcoming talks, to be held in Beijing on 7 and 8 January, will be implementing the important consensus” reached by the two leaders.

As for the United States, a quick announcement in the news was made that Deputy Trade Representative Jeffrey Gerrish will travel to Asia in order to resume negotiations.

As the Consumer Electronics Show started yesterday in Las Vegas, tech experts see that the two countries will have no choice but to amend the agreement, in order to maintain healthy job markets and growth.

Tech giants’ wake-up call

Largely criticized by economists, tariffs imposed on imported Chinese goods in the United States, as well as U.S made goods on the Chinese territory have hindered both economies.

On one hand, the American giant electronic manufacturer Apple shared alarming results, while its CEO Time Cook said earlier on this week on CNBC TV that the trade war deeply affected the company’s revenue in 2018.

On the other hand, other giant tech companies have made groundbreaking announcements, such as Sony, whom executives declared at the CES earlier this week that they might relocate jobs currently settled in China if the tariffs were maintained.

Moreover, some American companies take this as an opportunity to develop a branch in China as Chinese consumers represent a large part of their clientele. It is the case for Tesla.

Earlier today, Elon Musk, Tesla’s CEO announced himself that the car manufacturer was planning to open a plant near Shanghai as the production costs in the United States have become too high and have drastically reduced profits. This could become Tesla’s first foreign factory.

U.S job market at stake

While tech giants fear for their future in Asia, politicians defend tariffs as being a patriotic decision, in order to promote “Made in the U.S.A” products and create jobs.

The igniter of the rule, U.S President Donald Trump, reaffirmed himself his decision earlier this month on Twitter, justifying the action as “China and other countries (…) have not treated us fairly”.

However, a recent investigation published by the New York Times showed that some companies might have to cut off jobs that were created a year ago, such as car manufacturers who rely on parts made in China and that have now become too expensive to import.

In other words, maintaining tariffs as there are now is highly likely to hurt the U.S job market on the long run.

Talks will go on until Friday

While talks have started on Monday, January 7th, Chinese and American officials seem to be very optimistic about the results.

“These talks will have a positive outcome because both sides are trying to deal with the issue in an active and practical manner. I’m not saying there could be positive results; I think there definitely will be.” shared Wei Jianguo, a former vice commerce minister, to the Washington Post.

US. Commerce Secretary Wilbur Ross seemed to be very confident as well, as he shared with CNBC that “there a very good chance that we’ll get a reasonable settlement that China”.

These declarations seemed to reassure the market as both Chinese and American indexes were up: New York’s Dow Jones was up 0.4% and China’s CSI 300 rose by 0.6% on Monday.

playbook 2019

Read more: “End Of The Miracle? China Stands At a Crossroads”.

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.