On June 29th, the U.S. and China announced that the current trade war is calling a cease-fire. For months, the powerhouse economies have gone tit-for-tat when implementing tariff rates, sanctions, and adjusting their economic policies. President Trump and Xi nearly came to the same agreement months ago but fell apart due to China failing to comply with the U.S. This standstill is great news for online sellers, however, things will most likely get worse before they get better.
The Two Main Takeaways from the Trade Agreement
The fine details of the trade agreement are still under wrap by top government officials. No one knows the full details, but we do know some important factors. First off, tariffs are NOT going anywhere. The news appears that peace has been struck and tariffs will be lifted, but that news is still far away. Tariffs are here to stay. The good news is that the taxes will not increase. Trump threatened to enact higher tariffs in May, but the two countries decided to mull things over at G20 instead.The tariffs have doubled U.S. import tax revenue already this year. However, the two economies wanted to accelerate trade talks after the Huawei Sanctions.
This leads us to the second biggest news from the agreement: the U.S. will begin selling parts to the Chinese phone company once again. For those who do not know, Huawei has been accused of stealing top American technologies and protected patents. The Huawei sanction shows us that Trump’s policy towards the Chinese is no longer focusing on trade, but more so protecting American research. The sanction has been lifted but the U.S. will only supply parts that “don’t present a great national security problem”.
What the Trade Agreement Means for your E-Commerce Store
The trade war is no longer “up in the air” and is here to stay. Trump may even leave the issue ongoing until after the 2020 elections. He could possibly twist the story to “I am the only one he can solve the China problem.” If you’re a seller that is being taxed at a 10% rate, pay attention to your competitors and their pricing. The economic effect of tariffs will continue to raise the price of goods. Small increases on price can be partially passed onto the consumer. It is important to make sure that one can stay competitive AND profitable. If you’re a seller that is experiencing tariff rates at 25%, we would recommend looking into either 1.) leaning your supply chain or 2.) looking at other suppliers. Foriegn suppliers around the world see this trade war as an opportunity to obtain new clients.
Both China and the U.S. realize that the two economies are dependant on each other. However, each country has its own agenda and wants to become the powerhouse of world economies. The American stock market has risen to the occasion while China has forced the U.S. government to bail out the poverty-stricken farmers. The June 29th trade agreement has been a huge boost to both nations, but the problems are nowhere near to being resolved. If you are in need of help dealing with tariffs, contact us for a free consultation!