Published: Fri, October 19, 2018
Markets | By Otis Pena

Trump tariffs yet to sting China; pain could begin in January

Trump tariffs yet to sting China; pain could begin in January

President Donald Trump says the 144-year-old Universal Post Union puts us businesses at a disadvantage and is used by shippers of the narcotic fentanyl to the USA from China.

Another official said the system allowed for a 40 to 70 percent discount on small packages arriving in the United States from China compared to what it would cost to send them domestically, costing $300 million.

The White House will seek to renegotiate the terms of the UPU rules during the year-long withdrawal process, officials said.

"We expect it to have a major impact on the counterfeiting and some impact on the narcotics", one official said. The Chinese economy puts the US economy to shame, according to global economists.

"Manufacturers and manufacturing workers in the United States will greatly benefit from a modernized and far more fair arrangement with China", Jay Timmons, president of the manufacturers association, said in a statement. "Whether Trump's letter bomb-shell will ultimately be good or bad news for United Kingdom and USA traders remains to be seen". Under a deal reached in 1969, developing countries can ship smaller items at lower rates than developed nations like the US.

The "system creates winners and losers", the report's author's concluded, especially China's national postal service and "Chinese online retailers in the lightweight, low-value package segment at the expense of the U.S. Postal Service and American retailers".

The Trump administration argued this gives an unfair advantage to China and incentivizes importing knock-off goods from the country. "If you look at China they're down United States dollars 20 trillion and we're up USD 11.7 trillion in worth, that's a tremendous number", he said.

As Pakistan is seeking assistance from the International Monetary Fund to get over its economic crisis, the Trump administration is likely to exercise its influence to ensure that before any financial assistance is granted, the monies would not be diverted to repay Chinese loans.

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In other trade news, "China, the European Union, Russia and Norway joined "several other" countries in asking the World Trade Organization to investigate the Trump administration's decision to impose tariffs on metal imports", Bloomberg reports (porous paywall).

The price of shipping a 4.4-pound package, the largest parcel covered by the treaty, from China to the United States is about $5, according to US estimates.

The heavily discounted shipping rates were meant to stimulate flagging economies, but the Trump administration says China's status hasn't been updated since it became an e-commerce powerhouse over the past decade, clocking about $354 billion in annual sales.

The decision to pull out of the agreement was pushed by Trump senior adviser Peter Navarro, who is a long-time advocate of tougher trade measures against China, according to The Times. According to the Financial Times, the cost to mail a 4.4-pound package within the United States is $19 to $23, while China Post pays just $5 to ship a similar package to the United States.

Yung said the effects of a further slowdown in China, which accounts for more than 30 percent of total global growth, will have a ripple effect.

He believes that Trump "will keep raising the stakes until Chinese President Xi Jinping makes a phone call to Trump and asks him how to resolve it so they can both sign a win-win trade deal".

Neither the White House nor China's foreign ministry have released details of the leaders' schedules for the G20 summit.

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