Trade Deals mean 2020 Certainty; Impending Tariff Reduction
Washington D.C. - AAPA welcomes the conclusion of two separate years-long trade negotiations involving the United States' largest trading partners: China, Mexico, and Canada. The early 2020 timing of the deals should give industry the certainty it needs for planning and investment, despite many high tariffs remaining in-place on Chinese imports.
China: Phase One
This week President Trump signed what he says will be the first of several deals to increase Chinese markets for U.S. goods and services. The heart of the agreement is a) Chinese purchase commitments, and b) decreases in non-tariff barriers, in exchange for c) a marginal decrease in U.S. tariffs.
The Chinese purchase commitments break down to $75 billion in manufactured goods, $50 billion in energy, $40 billion in agriculture, and $35 billion to $40 billion in services, all over the next two years. The U.S. has agreed to freeze (but maintain) its current high tariffs on almost $350 billion (List 1, List 2, List 3) of Chinese imports, while cutting in half its latest round of tariffs, List 4A (from November) on consumer goods, from 15% to 7.5%. Unconfirmed reporting from the Administration suggests no other China tariffs will come down before 2021.
As the Chinese enter their holiday season, we might expect U.S. exports under these terms to kick into gear immediately, primarily because of swine flu and strained food supply. For American agricultural exporters, the Chinese agreement to accept FDA standards is important and reverses a worrisome trend. For the medium and long-term, American manufacturers will try to regain and readjust their Chinese supply chains, which they rerouted during the last two years of ratcheting tariffs and Chinese retaliatory tariffs.
AAPA will continue to advocate for full tariff rollback and will keep you updated during phase two.
United States - Mexico - Canada Agreement (USMCA)
With the Senate's overwhelming 89-10 passage of USCMA, the renegotiated deal finally comes into force and provides certainty and predictability for North American trade. While the agreement is especially useful for U.S. farmers and manufacturing labor, its predictability alone means the U.S. can continue to integrate North American supply chains while it pivots to negotiating with overseas trading partners, such as Japan, the U.K., and the E.U.
Currently, more than half of U.S. states count Mexico or Canada as their most significant trading partners, and this modernized agreement will mean more prosperity for the North American bloc.
AAPA will continue to advocate for free, fair, and reciprocal trade as U.S. policymakers pivot to more overseas opportunities.