The Friday Report: December 6th, 2019

China Cautions Tariff Cut Before Phase One Trade Deal with U.S.

Still in search of a satisfactory end to the China-U.S. trade war, the Chinese commerce ministry recently emphasized that some American tariffs must be rolled back before a phase one deal can be implemented. Both sides reported that they are in close communication.
A phase one deal had been anticipated in early November, before the next wave of U.S. tariffs were scheduled to take effect on December 15th. The log jam appears to be over “core issues of concern” namely increasing bilateral tensions outside of trade such as the Hong Kong protests and Chinese treatment of its Uighur Muslim minority population.

The Chinese are outraged over a U.S. House bill which condemns the country for Beijing’s crackdown on its Muslim Uighur minority population. The bill passed in a bipartisan 407 to 1 vote and condemns “gross human rights violations”. The Chinese object to any perceived outside interference in the country’s internal affairs. Passage of the bill by the Senate appears certain and may further antagonize trade negotiations. The bill follows another bipartisan measure that supports the five-month-long pro-democracy movement in Hong Kong. President Trump already signed the bill which requires that the U.S. State Department conduct an annual evaluation to help ensure that Hong Kong’s autonomous political structure remains intact. The U.S. has made this a requirement of favorable trade relations with China.

China Cautions Tariff Cut Before Phase One Trade Deal with U.S.

As product returns continue to climb, IKEA continues to search for new ways to manage the issue more effectively. A recent investment in U.S. tech start up Optoro looks to be promising in aiding the retailer with reverse logistics technology to retail stores, distribution centers and the IKEA U.S. customer support center.

Optoro software streamlines return flows. In addition, it aids in decreasing waste from returns including reducing carbon emissions released during return shipping, finding solutions for returned items and more.

U.S. Manufacturing in Decline, China in Recovery Mode

For the fourth consecutive month, the American manufacturing sector continued to decline. In contrast, China’s manufacturing industry is expanding, according to the National Bureau of Statistics of China. Measurement standards for the U.S. manufacturing industry revealed that the sector is at the lowest level of the year, and the lowest level since 2009. The U.S. manufacturing industry is hampered by soft demand and ongoing economic uncertainty due to global trade issues.

According to the Institute of Supply Chain Management (ISM), new orders are decreasing at a faster rate. Confidence of companies has diminished along with prices for the sixth consecutive month. The U.S. business community had wanted to have a U.S.-China deal in place to avoid the next round of tariffs which will begin December 15th.

Uncertainty is not stifling the growth of the Chinese manufacturing sector as it returned to expansion level in November. The uptick seems be fueled by increases in domestic manufacturing demand and expansion in enterprise. The increase may only be temporary, however. Increases in activity often occur after China’s week-long holidays.