Tariffs and Trade Update

BY Alex Ayers
11/20/2019 - HVAC Government Affairs

The Trump Administration has been busy in recent months working on multiple trade agreements and negotiations to bring certainty back to U.S. consumers and global trading partners. HARDI is tracking the news regarding tariffs and trade to make sure members are up to date on changes that could impact their businesses.

United States-Mexico-Canada Agreement (USMCA)

As Congress approaches the end of the year there is mounting pressure from Republicans and a growing number of Democrats to pass the US-Mexico-Canada Agreement (USMCA) to replace the existing North American Free Trade Agreement. House Speaker Nancy Pelosi stated last week, “We are moving positively” towards a deal with the Trump Administration. House Democrats are pushing for better labor and environmental standards be place on Mexico before an agreement is met. In addition, some House Democrats want to see trade adjustment assistance added to the agreement which helps industries that lose jobs because of the agreement.

Mexico has already ratified the agreement and Canada has made progress towards passage following the most recent Parliamentary election. Once U.S. trade officials reach an agreement with House Democrats, any further delay would be caused by politics. Some House Democrats do not want to give President Trump a political victory in the middle of impeachment investigations, however many centrist Democrats see the benefits of the USMCA for their constituents and believe it would be a victory for their own party as well.

Several studies have shown the U.S. will be benefited by the updated trade agreement that will help spur investment in manufacturing on the North American continent.

U.S. and China “Phase One” Trade Agreement

According to public statements, the U.S. and China are close to a mini trade agreement to ease some of the negative effects of the ongoing trade war. On October 11, President Donald Trump announced that a potential “phase one” agreement with Chinese President Xi Jinping. As part of the announcement, President Trump delayed tariff increases on $250 billion worth of Chinese imports set to go into effect on October 15 until December 15. In exchange, China has agreed to increase agricultural purchases and better protections for intellectual property rights. The agreement was set to be signed at the Asia-Pacific Economic Cooperation (APEC) Leaders Summit in Chile on November 16 and 17. However, due to social unease in Chile the summit was cancelled. A new meeting location has not been confirmed yet between the two countries.

The delay in signing has given both sides more time to negotiate, potentially endangering the agreement. Last week, China announced that removing tariffs is a condition for reaching a long-term agreement. A condition President Trump is not eager to agree to until certain changes by China are met. While the tariffs remain a sticking point with negotiators, China showed a sign of good faith on Thursday after removing restrictions on U.S. poultry imports that will allow imports of poultry products that follow Chinese laws and regulations. This is a relief to many U.S. farmers who have been hit hard by the trade war. While tensions begin to ease between the two countries, there are still unanswered questions on whether or not an agreement will be signed before Dec. 15. President Trump has warned China that if a “phase one” deal is not signed; he will impose another round of tariffs.

U.S. distributors will be benefited by this phase one agreement as it will help reduce the volatility caused by the 18-month trade war.

U.S. Japan Mini-Trade Deal

On September 25, 2019, President Donald Trump and Japanese Prime Minister Shinzo Abe announced they have finalized a limited trade agreement. This mini-trade deal will boost U.S. agriculture exports, lower some industrial tariffs and sets new digital trade rules.

Current trade law allows the president to lower U.S. tariffs below 5% without approval by Congress. The administration also wants to negotiate a comprehensive trade agreement to cover additional areas including financial and telecommunications services and issues such as intellectual property, government procurement and regulatory practices.

The limited trade agreement gives Trump a new talking point on trade, especially with rural voters who have been hardest hit by the trade war with China.

HARDI will continue to provide updates on tariffs and trade as news come out. Contact Alex Ayers at aayers@hardinet.org with any questions.

Check out the full list of HVACR Products, Parts, and Raw Materials affected by Tariffs.