Trade War Deal Reduces Tariffs & Provides Opportunity for Alcohol Brands
After over a year-long trade war between China and the US, a partial truce was signed in January. In the Phase One trade deal, the US agreed to relax some of the tariffs on Chinese imports, while China agreed to purchase an additional $200 billion worth of American products and services over the next two years.
Mersol & Luo provides a quick view into the phase one deal and its implications on global businesses.
Key Takeaways
Tariff Reductions
China announced on February 6 that it would reduce the tariffs imposed on $75 billion worth of American products that saw an increase in tariffs varying from 5% to 10% in August of 2019. This will not reverse all of the tariffs that have been imposed since the start of the trade war, but is a step towards reconciliation.
In the Phase One deal, the 5% tariff reduced to 2.5% and the 10% additional tariff is down to 5%. The products
included range from automotive and agricultural products, including crude oil, chemicals, meats, soybeans, seafood, and whiskey.
Purchasing of American Goods
Apart from the tariff reductions, China has committed to purchasing an additional $200 million of American goods over the next two years. This commitment applies to certain agricultural, energy and manufactural goods and services, with agricultural products accounting for over $40 million of the spend. Mersol & Luo clients should be aware that beer, wine, spirits, and other beverages are included in China’s commitment to purchase more U.S. agricultural products, thus leading to improved opportunities.
What to Expect Next?
The phase one deal is a significant step, and American businesses remain confident that China is committed to the purchases despite the coronavirus outbreak. Key areas of concern, such as intellectual property protections, have not been addressed yet and are likely to come to the forefront later this year. Mersol & Luo prides itself on guiding clients through the development of trade implications and ensuring businesses utilize strategies to anticipate future changes.
