U.S.-China Trade Deal Would Spare Tariffs on Holiday Toys and Games

Bruce Einhorn
U.S.-China Trade Deal Would Spare Tariffs on Holiday Toys and Games

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A possible truce in the U.S.-China trade war would offer a pre-holidays reprieve to companies like Apple Inc., Walmart Inc. and Hasbro Inc. that had been at risk of new tariffs on about $160 billion of Chinese-made consumer goods.

With President Donald Trump agreeing to the first phase of a trade deal with China, according to people familiar with the matter, the U.S. will not impose duties scheduled to take effect on Sunday. The Trump administration has yet to make an official announcement.

As the U.S. enters an election year, companies should have little reason to worry the threat of additional tariffs will reappear in 2020, according to Ian Bremmer, president of Eurasia Group.

“Trump does not have a lot more ammunition in the run-up to elections to hit the Chinese on U.S. consumer durables,” Bremmer said in a Bloomberg Television interview. “Nobody believes we’re likely to see much escalation on the trade front from Trump toward the Chinese.”

The proposed tariffs would have included popular items such as Made-in-China smartphones, tablets and laptops, and therefore would have delivered “a major gut punch” to Apple and semiconductor makers, according to Wedbush Securities analyst Dan Ives.

The Dec. 15 tariffs would have also included a 10% duty on toys imported from China, a change that would have especially penalized Hasbro, which produces nearly 70% of its goods in the country. China’s exports of traditional toys to the U.S. last year totaled $7.2 billion, according to data from the China Toy and Juvenile Products Association, which organizes the China Toy Expo.

Retailers like Walmart would have also been hit by the December tariffs, which the U.S. would have applied to footwear and apparel that had escaped earlier rounds of tariffs.

To be sure, the two parties in the trade war are still far from a final peace deal. The U.S. already imposed a 15% import duty in September on the majority of Chinese-made shoes and clothing, providing more incentive for companies to move their sourcing to lower-cost alternatives such as Vietnam and Cambodia.

The new truce won’t change that trend, according to Catherine Lim, a Bloomberg Intelligence analyst.

“The ongoing shift away from China could continue to accelerate into next year even if an initial phase one deal is reached between the two countries,” she wrote in a report published Dec. 12.

To contact the reporter on this story: Bruce Einhorn in Hong Kong at beinhorn1@bloomberg.net

To contact the editors responsible for this story: Emma O'Brien at eobrien6@bloomberg.net, Jeff Sutherland, Lisa Du

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