American retailers balk at Trump’s demand to exit China (updated)

WASHINGTON, 24 Aug 2019: 

The US National Retail Federation yesterday said it is “unrealistic” for American retailers to move out of China, the world’s second-largest economy, as 95% of the world’s consumers live outside the US.

“Our presence in China allows us to reach Chinese customers and develop overseas markets,” NRF senior vice president for government relations David French said in a statement.  “This, in turn, allows us to grow and expand opportunities for American workers, businesses and consumers.”

French said US retailers have been diversifying their supply chains for years but finding alternate supply bases is a “costly and lengthy process that can take years.”

Earlier, US president Donald Trump said he has ordered American companies to exit China after Beijing unveiled retaliatory tariffs on US$75 billion in US goods.

Later, the US said it will increase on Oct 1 the imposed tariffs on US$250 billion worth of Chinese goods from 25% to 30% as a response to China’s new retaliatory tariffs, Trump announced in a tweet.

The new twist into the bitter trade war between the world’s two largest economies saw Trump earlier tweet: “We don’t need China and, frankly, would be far better off without them. The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP.

“Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”

It’s unclear what legal authority Trump would be able to use to compel US companies to close operations in China or stop sourcing products from the country.

The US president said he also was ordering shippers including FedEx. Amazon.com Inc, UPS and the US Postal Services to search out and refuse all deliveries of the opioid fentanyl to the US.

China yesterday said it would impose retaliatory tariffs on US$75 billion of US goods – targeting crude oil for the first time and renewing punitive duties on American-made autos.

The latest salvo was in response to Trump’s plans to impose 10% tariffs on a final US$300 billion list of Chinese-made consumer goods on Sept 1 and Dec 15 – including cell phones, toys, laptop computers and clothing.

China’s Commerce Ministry said that on those same dates it will impose additional tariffs of 5% or 10% on a total of 5,078 products originating from the US – including agricultural products such as soybeans, beef and pork, as well as small aircraft.

Beijing is also reinstituting tariffs on cars and auto parts originating from the USthat it suspended last December as US-China trade talks accelerated.

“China’s decision to implement additional tariffs was forced by the US’s unilateralism and protectionism,” the ministry said in a statement.

US stocks fell sharply on fears escalation of the trade war could tip the US economy into recession. White House trade adviser Peter Navarro told Fox Business Network that US-China trade talks would nevertheless continue in September and dismissed the Chinese tariff threat as small in terms of the US economy.

On Thursday, top White House economic adviser Larry Kudlow said there was progress in a deputy-level US-China trade call this week. But neither side so far appears to be ready to make a significant compromise needed to end the nearly 14-month trade war.

The protracted dispute has stoked fears about a global recession, shaking investor confidence and prompting central banks around the world to ease policy in recent months.

In an interview on CNBC, Federal Reserve Bank of Cleveland president Loretta Mester said she viewed the Chinese retaliatory tariffs as “just a continuation” of the aggravated trade policy uncertainty that has begun weighing on US business investment and sentiment.

The knock-on effects of the US-China trade dispute was a key reason behind the Fed’s move to cut interest rates last month for the first time in more than a decade.

“It is unclear as things stand whether the US-China trade negotiations will continue as planned in early September,” said Agathe Demarais, global forecasting director at the Economist Intelligence Unit, in a statement.

“All eyes will now turn to the US Fed to see whether Jerome Powell, the Fed chairman, will react to these developments by accelerating rate cuts.”

In a keynote speech at the Fed’s annual central banking conference in Jackson Hole, Wyoming yesterday, Powell said the US central bank would “act as appropriate” to keep the economy healthy but did not say how fast it might cut rates.

Among US goods targeted by Beijing’s latest tariffs were soybeans, which will be hit with an extra 5% tariff starting Sept 1. China will also tag beef and pork from the US with an extra 10% tariff.

China is also reinstituting an additional 25% tariff on US-made vehicles and a 5% tariff on auto parts that had been suspended at the beginning of the year. Carmakers such as Daimler and Tesla had adjusted their prices in China when the auto and auto parts tariffs had been suspended.

Ford, a net exporter to China, said in a statement it encouraged the US and China to find a near-term solution. “It is essential for these two important economies to work together to advance balanced and fair trade,” the company said.

– Reuters