The countdown for bringing Chinese goods into the U.S. ahead of new import duties is now underway. But it’s unclear whether the sequel will match last year’s container crush due to high inventories and sourcing changes.
As FreightWaves reported, last week’s breakdown in trade talks between the two world’s largest economies pushed President Donald Trump to go through with an increase on tariffs in $200 billion worth of Chinese goods from 10 percent to 25 percent.
Those tariffs will essentially cover any import now ready to be shipped from China as of May 10. Any goods already on the water and arriving on or before June 1 will not face those tariffs.
On top of those new duties, the U.S. Trade Representative (U.S.T.R.) filed notice for placing 25 percent tariffs on an additional $300 billion in goods from China.
This fourth tranche of tariffs came as “China retreated from specific commitments made in previous rounds,” the U.S.T.R. said in a statement. “China also has announced further retaliatory action against U.S. commerce.”
The U.S.T.R. held out the hope for further discussions between the U.S. and China. Still, it is readying to put the tariffs in place.
Shippers and importers will have until June 10 to submit comments on impacts of the new tariffs. Live hearings are scheduled for June 17, with any rebuttals expected to be delivered in the following week.
The U.S.T.R. set no deadline for starting the new tariffs. But they may start within “weeks of the close of the respective public notice and comment periods,” according to earlier statements from the U.S.T.R.
The new tariffs, once in place, would hit a range of basic consumer goods. The 3,000 items listed on the U.S.T.R. notice fall into broad categories such as apparel, shoes, glassware, sporting goods, and televisions.
The tariff fears, though, meant many companies built up an inventory cushion thanks to the high level of imports into the U.S. last year.
The Total Business Inventory/Sales Ratio (SONAR: TBIS.USA) sits at a 20-month high of 1.39 for March. Similarly, net goods imports into the U.S. (SONAR: GOIM.USA) was at a record high of $214 billion for March.
Trouble is, a strong U.S. economy is eating up those inventories just as quickly as they are built. Retail sales reached $514 billion in March. (SONAR: RESL.USA).
Retailers appear ready to start building up their inventories again. As measured by days of inventory outstanding, most retailers were at their typical seasonal lows by the end of fiscal 2018.
But Chinese imports may not need to replenish those stocks. Retailers including Walmart are looking at sourcing goods in other countries due to the tariff concerns.
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