With temperatures set to soar into the high 80s and low 90s starting Monday, the dog days of summer are approaching and there are still so many unanswered questions on tariffs and the U.S.-China trade war—and maybe now even a new tariff battle on the horizon involving the European Union and digital taxes.
U.S.-China trade war: China’s Ministry of Commerce confirmed Wednesday the two countries have begun discussions to resolve the ongoing trade dispute. A key point in the negotiations for the U.S. centers on the protection of intellectual property assets. At the end of last month, U.S. President Donald Trump met with his Chinese counterpart, President Xi Jinping, at the G-20 Summit in Osaka, which resulted in a delay in any escalation of new tariffs. While earlier negotiations were said to be 90 percent done, talks collapsed in May and China was accused of reneging on some promises. Since the situation is fluid, tariffs still could get implemented at any time should talks again break down. But if that happens, it will likely have minimal impact on back-to-school sales, with the holiday selling season the next key period at risk.
European Union Digital Tax: The French Senate has approved a tax on multi-national technology firms such as Google, Facebook and Amazon, and other EU countries are planing their own digital levies. President Trump has ordered an investigation into the French levy, which amounts to a 3 percent tax on revenue earned in the country from digital services that are over 750 million euros ($847 million) globally and more than 25 million euros ($28 million) in France. Besides being a revenue generator, it’s also a way to prevent foreign firms from evading taxes in France by booking revenue elsewhere in a country where the tax rates are lower.
The U.S. Trade Representative’s Office is expected to hold a hearing on the digital services tax next month. The USTR, when it issued a notice on Wednesday, said the investigation was to determine whether the levy is “discriminatory or unreasonable and burdens or restricts United States commerce.” There’s already talk of possible retaliatory tariffs imposed by the U.S. or other trade restrictions.
U.S. Retail Sales: June’s Retail Sales report will be out on Tuesday, perhaps providing a clue on whether the U.S. economy is holding its own or losing some momentum.
Earnings: Skechers U.SA. Inc. reports second-quarter results on Thursday after market close.