As the deadline to reach a US-China trade deal approaches, and Amazon and Walmart adjust to new e-commerce legislation in India, there are a couple confounding factors regarding the future of US taxation of foreign imports:
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- US President Trump and Chinese President Xi Jinping will miss their trade agreement deadline. President Trump said on Thursday that he will not be meeting with President Xi before the March 2 deadline — at which point tariffs on Chinese goods are set to more than double — to reach a trade deal, CNBC reports. The delay in their meeting owes largely to President Trump’s preparations for a summit with North Korean leader Kim Jong Un that’s set for February 27-28. President Trump and President Xi are still expected to meet “shortly thereafter,” but the question of what will happen to the tariffs on Chinese goods remains.
- The US is considering removing a trade concession that currently benefits India.Named the “Generalized System of Preferences” (GSP), the concession grants India zero tariffs on $5.6 billion of exports to the US, according to The Times of India. While President Trump has repeatedly called India out for its high tariffs on US goods, the most recent trigger for possibly withdrawing or scaling back GSP is India’s new e-commerce regulations, which restrict the ways foreign e-tailers like Amazon and Walmart-controlled Flipkart can operate. Those regulations, along with data localization efforts and higher tariffs on electronic products and smartphones on India’s part, have damaged negotiations toward a broader trade package the two countries began last year.
These negotiation complications could have negative consequences for China and India. If the US goes forward with the tariff escalation — which will see 10% tariffs on $200 billion of Chinese goods increase to 25% — it could be a shock to a Chinese economy that’s already struggling with the current trade hostilities.
At the same time, if the US withdraws GSP from India, it could deteriorate trade negotiations between the two countries even further. In the worst case for India, this could lead to President Trump demanding a free trade agreement — zero tariffs on US goods — which would be a big threat to the local industry that India’s e-commerce regulations are trying to protect in the first place.
Worsened trade situations with China and India would be problematic for the US as well. Increased or new tariffs on goods from these countries are likely to affect prices of consumer items, and if this happens, consumers may be more hesitant to shop.
This could jeopardize 2019’s retail growth, which is already forecast to decelerate from 2018’s increase. There’s also always concern for the US that higher tariffs on China and India will result in retaliatory measures by those countries, potentially making the situation even worse.
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Source: Business Insider