Democratic House Minority leader from California Nancy Pelosi (L) and Democratic Congressional Campaign Committee chair Ben Ray Lujan (R) from New Mexico react to early returns from the 2018 midterm general election during a House Democratic Election Night event at the Hyatt Regency in Washington, DC, USA, 06 November 2018.House Democratic leaders watch 2018 midterm election returns in Washington, DC, USA - 06 Nov 2018

Democrats might have won back the House of Representatives, promising to bring a more robust set of checks and balances to Washington, D.C., but experts aren’t looking for the switch to help fashion companies struggling through the trade war with China.

As Americans moved on from the hotly contested midterm elections — which carried the potential for massive rebuke of Trump’s America-first policies, but ended with a more mixed result — an analysis by economic consultancy IHS Global Insight said policy gridlock would “almost certainly increase.”

Wall Street, which has had plenty of change to digest under Trump, celebrated what seemed to be a more status quo policy environment, and pushed the Dow Jones Industrial Average up 545.29 points, or 2.1 percent, to 26,180.30. The retail and fashion gainers included Amazon.com, up 6.9 percent to $1,755.49; Canada Goose Holdings Inc., 3.9 percent to $61.59; Dillard’s Inc., 3.8 percent to $79.40; Alibaba Group Holding, 3.4 percent to $152.50; Stitch Fix Inc., 2.6 percent to $28.17, and Hanesbrands Inc., 2.4 percent to $16.91.

IHS noted Trump will still be able to pursue his trade agenda through executive actions targeting “trade imbalances” as well as “alleged Chinese intellectual property theft and forced technology transfers.”

House Democrats are expected to largely use informal methods to react to the U.S.-China standoff that are unlikely to result in any fundamental changes to the administration’s trade policies.

David Spooner, a partner at Barnes & Thornburg and a former trade official under President George W. Bush, added that while the House will make Trump’s life “miserable,” it is “highly unlikely” to actually move to reign in the President’s trade authority through repealing tariffs outright or moving to amend the law that gives Trump the power to impose tariffs.

There could be some noise made regarding specific products targeted by the administration in Congressional hearings on the exclusion process.

“I don’t think the tariffs will go away, but I think we’ll see a little more probing into how the decisions were made and whether or not products should be excluded,” said Spooner, who was speaking at the U.S. Fashion Industry Association’s apparel importers trade and transportation conference in New York Wednesday.

There also might not be so much distance between Congress and the White House on key Chinese trade issues, such as the deficit in goods and intellectual property rights, which are issues that have been brewing in Washington for over a decade.

“Congress, on both sides of the aisle, largely agrees that the U.S. should get tough on trade with China, and therefore won’t repeal the tariffs altogether,” Spooner said.
Erin Ennis, senior vice president of the U.S.-China Business Council, said the best chance for resolution with China will come on Dec. 1, when Trump meets President Xi Jinping in Buenos Aires at the end of the G20 Summit.

But she stressed that if those talks don’t go well, there is a 50/50 chance of a fourth round of tariffs hikes on imports from China.

After targeting around $250 billion of Chinese imports in three separate tranches, Trump has earmarked another $267 billion worth of Chinese imports that he can hit with levies on short notice.

While many believe this would cover every single Chinese import, Ennis stressed that this may not be the case as the president could double tariffs on some products.

“We don’t know if that means they’re literally going to have a list that has everything else or if, because of concerns of no alternative sources of those products and what the impact might be on U.S. consumers, they might go back to some of the previous lists and simply propose an increased tariff,” she said.

For now, it seems the industry, which relies heavily on imports from China, will simply have to wait and see.

Bill Jackson, assistant U.S. Trade Representative for Textiles, also made a showing at the conference, but kept mum on details.

“I know that the policy of using the tariffs through the 301 [process to enforce U.S. rights in trade agreements] has been controversial, but I think that it’s fair to say that we’ve gotten the attention of the Chinese on this,” he told the retail-heavy audience.

“I think we all can agree that we would like to see this situation resolved without further impact on our trade, but the President is very keen to ensure that he brings something home that’s meaningful and important and affects the underlying issues over the long term,” he said.

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