The ongoing tiff between US-China trade will have significant impact on global economic landscape. How things pan out is still not known, yet going by the present picture, things don’t look too bright between the two countries with severe allegations made by the US government on China. President Trump on April 3 released a long-winding list of Chinese imports that his administration intended to target as part of a crackdown on what he believed to be unfair trade practices. The sectors covered by the proposed tariffs included products used for robotics, IT, communication technology and aerospace. The US Trade Representative (USTR), said it was targeting products that benefit China's industrial plans while minimising the impact on the US economy.
The US was expected to levy tariffs on $50 billion to $60 billion of Chinese imports annually. The official announcement underlined that the total value of imports subject to the tariff increase would be equal to ‘the harm caused by China’s unreasonable technology transfer policies.’ The official note remarked that the Trade Representative proposes an additional duty of 25 per cent on a list of products from China. The American list included over 1,300 imported products. The Chinese reaction was immediate. The next day, it announced additional tariffs on 106 US products. This was in addition to 128 other US export products that had been listed earlier by China. The effective start date for the new tariffs has not been announced, though China’s ministry of commerce made it clear that the tariffs were designed to target up to $50 billion of US products annually.
On the ongoing situation, Rick Helfenbein, President & CEO, American Apparel and Footwear Association, stated the industry is pleased with the administration’s decision to avoid adding tariffs to US imports of apparel, footwear, and travel goods from China. At the same time, they showed their concerned towards the list that includes tariffs on machinery used in their domestic manufacturing process. This would directly raise costs on domestic manufacturers and impact their ability to grow Made in USA. Speculations are rife that the cost of doing business would go up, and even though the US President harped on the job protection string, many believed that the additional tariffs would only push up costs of apparel for the average American customer. American companies have already scouting for alternative sourcing hubs, since domestic apparel manufacturing would become more expensive with the additional duties on machineries.
Stats and the impact
As a retaliatory measure, apart from cotton, China proposed additional tariffs on soybeans and pork. The National Cotton Council averred that China is the second largest export market with purchases of approximately 2.5 million bales of US cotton. Ron Croft, chairman of the Council, said that no one can overstate the importance of China’s market to the US cotton farmers and the importance of US cotton in meeting the needs of China’s textiles industry. The cotton industries of the US and China enjoy a healthy, mutually beneficial relationship. In lieu to this, the NCC encouraged the two governments to engage in immediate discussions that can resolve trade tensions and preserve this long-term collaborative relationship. The US cotton industry stands ready to assist the US Government and its trading partners in China to find a resolution to this damaging trade dispute. The high-profile United States Fashion Industry Association (USFIA) had, even reiterated over an earlier statement that while they support efforts to protect the intellectual property of brands and retailers, they will never support punitive tariffs based on the fiction that imports harm domestic jobs and growth. These new tariffs will not create more jobs in the United States, but instead, will harm the companies that already create thousands upon thousands of high-quality jobs in design, in marketing, in retail, in logistics, in compliance, right here in the US.
The way ahead
China produces about 32 million bales of cotton but needs roughly 45 million bales; the shortfall is met by imports. China’s cotton stockpile is expected to come down to around 15 million bales by the end of this year; much of that is reckoned to be of poor quality. Among the initial reactions after the conflagration broke out were those from the cotton sector in India. Early speculations hovered over the possibility of India trebling its cotton exports to China. Atul Ganatra, president, Cotton Association of India, stated that India was looking to sell between 2.5 million and 3 million bales, each of 170 kg, to China in the next marketing season beginning October, up from around 800,000 bales of expected exports in the 2017-18 marketing year. This year China is scheduled to import 2.5 million bales of cotton from the US, with the other major suppliers being Brazil and Australia. But for India to replace Australia, to start with, as the second largest exporter of cotton to China, Indian cotton will need to match that of the Australian variety.