China and the United States held high-level trade talks at the G20 in Argentina and although many of the details are unknown or being debated, the decision to halt additional tariffs is a welcome development to housewares manufacturers and retailers. The planned increase to “List 3” tariffs from the current 10% level to 25% on January 1, 2019 was going to be painful to the industry and would likely impact consumers.
A delay in implementation of the 25% tariff and agreement to hold off on any new tariffs is a good sign that the parties are working toward a resolution. The delay has allowed for some breathing room for our members and retailers to deal with the tariffs currently being collected. Unfortunately, a significant amount of uncertainty remains and that makes planning future pricing and inventory levels challenging for all parties.
Many manufacturers are taking a serious look at moving some manufacturing out of China to better diversify their supply chain. This trade dispute has highlighted the challenge of locating all manufacturing sources in one country or region and many have begun or accelerated the process of transitioning production out of China.
The preliminary agreement to hold off on new tariffs was positive but what is needed is a firm agreement to improve trade terms between the U.S. and China. For the housewares industry, the hope is that the two sides can come together to reach a mutually beneficial agreement so all involved parties can plan accordingly and move forward, taking into account the impacts of the new tariffs if they are implemented in the near future, following this “90-day hold”.