China Sourcing: An Update on China Tariffs Deadline

Four weeks ago, I shared with youMichael De Clercq’s blog about his predictions on a positiveoutcome of the additional tariffswith China. As you know, President Trump originally set a deadline of March 1^st. We are now at that deadline and,a few days ago, we all learned that hepostponed this deadline indefinitely, citing progress with China in trade talks.

The following is a quick update on the main points of this tariff issue:

• President Trump expects to have some “very big news” over the next week or two.
• For now,tariffs on the $200b of China’s exports will not increasefrom 10% to 25% onMarch 2^nd.
• Michael’s predictions seemto still hold true. You can read more about them here.
• In our view, these are the 3 possible scenarios for the future (with our estimation of likelihood in percentage form):
  • Best case scenario: The best-case scenario would be that China makes large concessions,that the tariffs stay at 10% and will progressively be reduced to 0% in the future provided the Chinese meet certain obligations. (30%)
  • Worstcase scenario: The worst-case scenario is that China makes insufficient concessionsand the tariffs are increased to 25%, and that more products become subject to tariffs. (10%)
  • Likely scenario: China makes sufficient concessions, the tariffs stay at 10% and no additional tariffs are created. (60%)

We will know more about the imposed tariffs and any new developments over the weekend. As we’ve said before, we believe there are incentives forboth sides to cooperate and resolvethe ongoing disruption.

 

By Jocelyn Trigueros