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Uncertainty Looms Over Business Planning Despite UK, US Developments: Week Ahead

Political paralysis appears to have finally de-escalated in the U.S.-China trade dispute and even across the pond, where the Conservative party scored a majority win in the U.K. general election Thursday.

While each outcome provides some measure of certainty over the next course of action, there’s still much to be done. And businesses in the U.S. and U.K. still face uncertainty when figuring out how best to plan for the year ahead.

U.S.-China

President Trump took to Twitter early Friday to share news of the trade deal with China.

“We have agreed to a a very large Phase One Deal with China. They have agreed to many structural changes and massive purchases of Agricultural Product, Energy, and Manufactured Goods, plus much more. The 25 percent Tariffs will remain as is, with a 7 1/2 percent put on much of the remainder….” Trump tweeted.

“The Penalty Tariffs set for December 15th will not be charged because of the fact that we made the deal. We will begin negotiations on the Phase Two Deal immediately, rather than waiting until after the 2020 Election. This is an amazing deal for all. Thank you!”

For now, the existing 25 percent tariffs on about $250 billion of Chinese imports will stay, and the 15 percent tariffs on goods such as apparel and footwear that went into effect on Sept. 1 are now lowered to 7.5 percent, the National Council of Textile Organizations said Friday, adding that tariffs for the balance of the Tranche 4 list set for Dec. 15 will no longer go into effect.

“In plain terms, this is a détente in the trade war, and while that is certainly a welcome development, it is far from a meaningful trade deal,” Tim Quinlan, senior economist at Wells Fargo Securities, said.

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Quinlan was quick to note the paucity of other details connected to the “Phase One” deal. They include mention of “substantial additional purchases” of U.S. goods by China, but no dollar amounts, and the requirement of “structural reforms” such as for intellectual property, but little by way of specifics.

“An argument could be made that the trade war’s biggest cost is not in the specific dollar terms we have calculated, but rather the increased uncertainty and the potential toll on business spending. We suspect today’s deal is short of the reassurance sought by many businesses worried about trade,” Quinlan said.

Brexit

Boris Johnson’s win across the pond provides more clarity over his ability to “get Brexit done.” His next task is securing approval of a withdrawal agreement that would allow the U.K. to leave the European Union with a deal in place by Jan. 31, 2020. Although the trajectory now points to an E.U. exit, the Conservative bloc stills faces the task of negotiating a longer-term trade relationship between the E.U. and U.K.

And uncertainty persists on other fronts.

“His party’s large majority in the Commons helps him pass his Brexit deal… [however,] there’s still a long way to go. Mr. Johnson’s self-imposed end of December 2020 deadline is a mammoth challenge, and a no-deal Brexit is still possible on Jan. 1, 2021,” Nigel Green, CEO and founder of financial advisory firm deVere Group, said.

The question of Scotland’s future in the U.K. and whether it might seek to secure independence also hangs in the balance. “Mr. Johnson’s monumental task to deliver Brexit with a deal and the Scotland issue will continue to fuel uncertainty in 2020,” Green said.