Trade professionals should expect more tariffs if President Donald Trump is re-elected, warned a former U.S. trade representative, Bob Zoellick, who was speaking to an audience at the Washington International Trade Association on Feb. 4. In a second Trump term, “expect a China sequel.” He said that the European Union is clearly in his target sights now. “If you're in Brussels or if you’re in the European Commission embassy here,” he said, or if you're a company that does production in Europe, there's “a flashing yellow light and it’s turning orange. One thing we know about Trump, he’s not subtle.You're next.”

Experts disagreed on whether the spread of the coronavirus will make it impossible for China to reach its purchase commitments, or make it more likely that China will wish to please the U.S., as its economy suffers. But one thing most agreed on -- the disease's impact is another reminder, after the tariff war, that companies should diversify instead of being wholly reliant on Chinese factories. The experts were on a panel at the Washington International Trade Association conference Feb. 4 on the future of U.S.-China trade.

Eliminating Thailand's eligibility for the Generalized System of Preferences program, because of a complaint from pork producers, would hurt U.S. importers more than Thai businesses, one witness said, and would be unlikely to convince the country to allow pigs fed with ractopamine to be imported. China and the European Union also ban meat that was fed the growth-enhancing drug. Dan Anthony, testifying on behalf of the GSP Action Committee, told the panel of government officials that they should put great weight on the potential harm to U.S. importers as they make their decision. He gave the example of a 25-person company that imports from Thailand, and had to pay $60,000 to $70,000 a month in tariffs during the two years GSP was not in force. Once it was renewed, the North Carolina company hired 17 full-time employees, and today, employs 70 people.

Fossil Group filed for an exemption to the 15 percent List 4A Section 301 tariffs it has paid since Sept. 1 on the traditional watches it imports from China under tariff subheading 9102.11.2520, said a Dec. 6 posting in the Office of the U.S. Trade Representative’s public docket. “Fossil continues to look for ways to diversify its sourcing for traditional watches,” the vendor said. It recently invested in a factory in India that has “capacity to address our product needs” for the local market, but can’t “address our product needs in the global markets,” it said. “Watch manufacturing is a highly specialized skill which cannot be readily duplicated.” Moving traditional watch manufacturing out of China “is not feasible at this time, especially in the very challenging market for traditional watches that Fossil has been experiencing over the last couple of years,” it said. The exemption request doesn’t list Fossil smartwatch imports, which also have List 4A exposure. Fossil also requested exemptions on four classifications of watch straps imported under subheadings 9102.11.10.30, 9102.11.25.30, 9102.11.30.30 and 9102.11.45.30, plus three on the watch cases it imports under subheadings 9102.11.10.20, 9102.11.30.20 and 9102.11.45.20.

IRobot started making some models of its Roomba vacuum line in Malaysia as part of an effort to shift away from China, the company said in a Nov. 21 news release. “Establishing manufacturing operations in Malaysia is a fundamental component in our initiative to diversify iRobot's manufacturing and supply chain capabilities, while also mitigating our exposure to current and prospective tariffs on products that are imported from China," said Colin Angle, CEO at iRobot. The company previously announced the plans to begin a production line in Malaysia (see 1910230027).

Consumer electronics company Sonos forecasts a $30 million blow to fiscal year 2020 profits, resulting from the 15 percent Section 301 List 4A tariffs that took effect Sept. 1, Chief Financial Officer Brittany Bagley said on a Q4 call Nov. 21. Most of the impact will be in the holiday quarter, she said. Citing “frequent speculation” about trade negotiations, Bagley said, “We are assuming for the purposes of this call that this remains in effect for the full year at 15 percent.” To mitigate tariff exposure, the company is diversifying its supply chain out of China and has accelerated production of U.S.-bound products in Malaysia. That capacity is “ramping up quickly, and we believe we will have largely eliminated the go-forward impact of tariffs by the end of the fiscal year,” Bagley said.

Timing of List 4B Section 301 tariffs, due to take effect Dec. 15 on smartphones, laptops, tablets and other goods, “could not have been worse" for a consumer tech sector already facing product innovation and demand pressures, Futuresource Consulting blogged. Tech companies need to be agile and resilient as global trade and geopolitical tensions have disrupted technology supply chains that were optimized for long-term cost efficiencies, the researcher said. Companies have to optimize for the disruptions, while using trade uncertainties as an opportunity to create a strategic competitive advantage, it said. Global consumer electronics supply chains are at increased risk of “fracturing” as a result of the U.S.-China trade dispute, said Futuresource, which sees a “short-term fix” as a survival strategy, allowing companies to re-evaluate classification and product routing of key components. Long term, tech firms should consider a “China Plus One” strategy whereby companies active in China augment existing investments with a second facility to diversify risk, cut costs and reduce over-reliance on China. That’s beginning to happen, with some companies announcing they’re transferring production facilities to Vietnam, for example, it said.

Almost half of companies that responded to the U.S.-China Business Council's annual survey on the business climate in China said they have lost sales in China since the trade war began. The most common reason is because of retaliatory tariffs on U.S. imports to China, according to these 100 multinational firms based in the U.S. Another third said they lost sales because of U.S. tariffs.

Five trade groups, representing domestic shoe manufacturers, shoe importers and shoe retailers, are telling President Donald Trump that putting 25 percent tariffs on Chinese shoes, shoe components and machinery used to make shoes would have catastrophic consequences for the industry. "Although our members have been diversifying from China, that process cannot take place overnight," the letter said. "The U.S. footwear domestic manufacturing and U.S. footwear import industries stand united in expressing our grave concerns these tariffs won’t help any segment of our industry," the American Apparel and Footwear Association, the Rubber and Plastic Footwear Manufacturers Association, the Outdoor Industry Association, the Sports and Fitness Industry Association and the Footwear Distributors and Retailers of America wrote in a letter sent May 30. The increased costs of shoe components could drive American factories out of business, they said. And AAFA talked about the U.S. jobs in design, logistics and compliance that could be lost if fewer shoes are purchased because of increased costs for consumers.

Six weeks ago, the senior vice president of the U.S.-China Business Council believed the Trump administration's pressure was successfully empowering Chinese officials who believe in reforming China's capitalist/state-controlled hybrid economy. "I was pretty optimistic that we were, as a consequence, going to be able to say that the administration had achieved things that probably no previous administration had genuinely been able to achieve," Erin Ennis told an audience member at the Washington International Trade Association China trade panel May 29.