The tariff hike and trade war between the U.S. and China took center stage this week and will be a key theme for some time to come, particularly because China has raised the spectre of retaliatory actions.
Trade Wars, and More Tariffs: UBS economist Seth Carpenter said Friday that the recent hike to 25 percent on $200 billion of imports from China would likely take about a quarter of a percentage point from real GDP growth for about six months. “With talks breaking down, the Chinese government announcing retaliation, and [U.S. President] Trump calling for additional tariffs, negotiations will be difficult to restart and nearly impossible if Trump moves forward with the next tranche of tariffs,” he said.
The economist also noted, “Escalation to tariffs on all imports from China would largely affect finished consumer goods, so the supply chain effects are likely smaller.”
In a report from credit ratings firm Moody’s Investors Service, its credit analysts determined that the tariff increase, which they predicted will “remain in place for some time,” will adversely affect consumer and business confidence at a time when the global economy is already slowing. They did note that the direct effect of the new increase “will be manageable for the U.S. economy, but will strain certain sectors. Moreover, the tariffs will act as a tax on U.S. business and households and temporarily raise inflation.”
Currently, the Moody’s analysts believe the tariffs that went into effect on Friday are a “credit negative” for “U.S. retail and wholesale distributors of furniture, home goods, electronics, hardware and appliances that source finished goods from China destined for both U.S. consumers and businesses.”
And earlier this week, U.S. Commerce Secretary Wilbur Ross addressed a gathering at the Trade Winds Indo-Pacific Trade Mission and Business Forum in New Delhi, India. The country in March lost preferred status for certain goods and officials have raised the idea of higher duties on certain goods from the U.S. entering India. Commerce Secretary Ross commented in an interview for CNBC-TV 18 on a possible retaliatory tariff by India due to the loss of preferential treatment on some trade privileges. “We don’t believe under the [World Trade Organization] rules that retaliation by India would be appropriate,” he said.The U.S. has taken issue with India’s trade restrictive policies that hurt foreign companies.
Also upcoming for the U.S. are trade talks with the European Union over aviation subsidiaries.
Earnings: It’s still earnings season for companies in the retail and apparel sectors. Reporting next week are: Ralph Lauren Corp., Iconix Brand Group, Xcel Brands Inc., Alibaba Group Holding Ltd., Macy’s Inc., Farfetch Ltd. and Walmart Inc.
Events: A hearing will be held on Wednesday in Manhattan at City Hall on a proposed ban on fur. Unlike the ban in Los Angeles, the New York City proposal also includes calf hair and shearling, which are considered food by-products.
In addition, there will be an Apparel Sourcing Show in Guatemala, Tuesday through Thursday,the at the Grand Tikai Futura Hotel and Convention Center.