Not rendering correctly? View this email as a web page here.

Trade Update: Mexico, China, and Global Growth

Trade tensions decrease with new agreements while worries of economic slowdown increase.

No tariffs on imports from Mexico: The US and Mexico reached an agreement last Friday preventing tariffs from being applied to all imports of products from Mexico, including HVACR equipment. The tariffs were initially planned to start today at 5 percent and increase by 5 percent every month until the rate reached 25 percent. Luckily negotiators announced a deal just prior to implementation.

President Trump initially demanded that the Mexican government stop the flow of Central American migrants coming to the United States to seek asylum or entering the country illegally. The agreement details released so far contain very few new obligations beyond what has been agreed to previously. As part of the agreement to avoid tariffs, President Trump announced that Mexico would buy $2 billion worth of US agricultural products.

This agreement is the result of a familiar strategy employed by President Trump — threatening or enacting tariffs over a disagreement between two countries to gain leverage. This strategy was seen in the President’s demand to renegotiate NAFTA, the new US, Mexico, Canada Agreement (USMCA) which is largely the same as NAFTA, with some changes to account for new technology and worker rights but far from a complete renegotiation of the agreement as the President initially demanded. 

China trade deal still possible: Later this month President Trump will meet with Chinese President Xi Jinping with the goal of jumpstarting stalled trade negotiations. President Trump recently increased tariffs on $200 billion in Chinese imports, including many HVACR parts, and threatened to add tariffs to over $300 billion additional imports if negotiators don’t reach a deal soon. In response, China increased retaliatory tariffs on US exports.

Both sides announced an agreement was close earlier this year but talks fell apart after China reportedly reneged on provisions that were previously considered settled. The President hopes leverage from increased tariffs will bring the two sides together to reach an agreement. A list of affected products is available here

Trade disputes hurting global economic growth: Trade and finance ministers from the world’s 20 largest economies met over the weekend to discuss slowing global economic growth. Many pointed to the US’s use of tariffs and increased trade tensions globally as part of the reason for slowing growth. Finance officials worry that if trade tensions continue the global economy could contract and begin the next recession. Trade officials agreed to WTO reforms to help settle future trade disputes but the President is unlikely to stop threatening tariffs as part of his negotiating strategy. 

We will continue to keep you updated on changes to tariffs as trade negotiations progress. As always, please feel free to reach out to Alex or me with questions. 


Palmer Schoening
Vice President of Government Affairs

social-icons-white-03   social-icons-white-02  social-icons-white-01