After being weighed down by uncertainty surrounding the trade war, stocks were given a boost Tuesday after President Donald Trump announced he will sit down with China’s President Xi Jinping at the G20 summit in Japan for an extended meeting, ending weeks of will-they-won’t-they speculation and fueling hope for a resolution.
Making the announcement just hours before launching his 2020 re-election bid, Trump tweeted that he had spoken to his Chinese counterpart on the phone and arranged for their teams to start talking before they meet face to face next week.
The news, also confirmed by China’s state newspaper Xinhua, immediately sent the Dow Jones Industrial Average surging 350 points as investors interpreted it as a positive sign that a further round of tariffs could be avoided.
By the end of the day, the leading stock index had managed to hold onto all of its gains, closing up 353 points, with Wall Street also buoyed by speculation that the Federal Reserve could on Wednesday signal that rate cuts are on their way.
The G20 summit will mark the first time that the two leaders will meet since trade talks broke down in early May after China allegedly reneged on a number of commitments it had made in previous negotiations.
The Trump administration responded by raising tariffs on $200 billion worth of goods, including handbags, to 25 percent from 10 percent and like other rounds, China fired back with its own levies on American imports.
Since then, the U.S. has been preparing to place 25 percent tariffs on all Chinese-made goods that have yet to be targeted, which would drag apparel and footwear into the fray.
A seven-day period of testimony relating to this latest tariffs wave — totaling some $300 billion of annual imported goods — began Monday in Washington at the office of the United States Trade Representative, with representatives from the Accessories Council and Kenneth Cole among those giving evidence.
On Wednesday, Edward Rosenfeld, ceo of Steve Madden and Marc Fisher of Fisher Footwear will make their cases, while representatives from PVH, Ulla Johnson, New Balance, Fila, Forever 21 and Cynthia Rowley are scheduled to testify in the coming days.
A spokesperson for Ralph Lauren told WWD that it would not be sending a representative to the capital, but its president and chief executive officer Patrice Louvet was one of a host of major American retailers to have written to U.S. Trade Rep. Robert Lighthizer in recent weeks.
In his letter, Louvet cautioned that additional tariffs on clothing, footwear, accessories and other consumer goods, already currently among the most heavily taxed product commodities, will result in higher costs for goods and services to the average cost-conscious U.S. family, “which will in turn lower apparel and footwear sales, resulting in loss of jobs for U.S. workers.”
The ceo also discounted Trump’s claims that companies could simply shift production out of China, arguing that for certain products, other countries do not have the capacity or capability to manufacture them due to technological or workforce constraints.
All these companies will no doubt be hoping that a deal can be made at next week’s meeting, but Erin Ennis, senior vice president of the U.S.-China Business Council, told WWD that it’s unlikely they would get to a full resolution by the end of the month because she understands that they haven’t been negotiating since talks broke down in May.
Ennis believes that while it’s “certainly possible” that they could at least come up with some sort of a framework to move forward, companies should still be preparing themselves in case the administration does pull the trigger on the latest round of proposed tariffs.