By Kathryn Hopkins
with contributions from Evan Clark
 on June 27, 2019
Donald Trump, Xi Jinping. President Donald Trump, right, with China's President Xi Jinping, left, during their bilateral meeting at the G20 Summit, in Buenos Aires, ArgentinaTrump G20 Summit, Buenos Aires, Argentina - 01 Dec 2018

Matters discussed at high-level meetings between world leaders wouldn’t normally turn retailers’ heads from the day-to-day running of their businesses.

The G20 summit in Osaka, Japan, which takes place Friday and Saturday, is different.

That’s because it will be the first time President Trump and China’s President Xi Jinping will sit down together since trade talks unexpectedly broke down in May and the U.S. threatened to impose additional 25 percent tariffs on all Chinese imports that have yet to be targeted — impacting apparel and footwear for the first time.

The proposed levies are particularly worrisome for the industry as they come on top of average duties of roughly 13 percent already paid for apparel and footwear from China. A host of major American fashion companies have warned that the duties would likely result in higher prices for consumers, job losses and store closures across the country.

Adding to their woes is the fact that Trump on Wednesday indicated that he may also consider unleashing tariffs on Vietnam, which is second to China when it comes to apparel imports and is where many companies have been moving operations.

While no bystander can know what will happen at this weekend’s meeting — or what Trump will tweet before or after — industry groups are hoping that the two sides will at the very least agree to restart negotiations and that the U.S. will hold off on forging ahead with its latest round of tariffs.

“We’re very optimistic that they can come together and chart a course toward a solution to the current situation. I don’t think they’re going to announce a deal this weekend, but I do think they can do a lot of good toward removing the threat to global growth that the current trade war poses,” David French, senior vice president of government relations at the National Retail Federation, told WWD.

Julia Hughes, president of the United States Fashion Industry Association, agreed. “There may not be 100 percent resolution — a deal is signed and we’re done. I don’t think we’re going to be done with this kind of back and forth on trade, but I do think that we can have a truce,” she said.

At the same time, Rick Darling, chief executive officer of supplier Global Brands Group, told analysts at a meeting Wednesday that while his company has been operating under the assumption that higher tariffs for apparel and shoes would kick in before September, if the meeting goes well, “our feeling is it’s more likely that they might delay the implementation of additional tariffs and give both sides a little bit of breathing room to try to negotiate a deal.”

A truce, however, doesn’t mean that the threat of tariffs that has hung over retailers for months will disappear.

“I think we have to be realistic that tariffs remain on the agenda even if they do announce a truce and it’s going to take a lot of work to completely remove the threat of tariffs,” said French.

“Both sides have significant concessions that they have to make in order to come together. It’s very likely that one of the conditions the U.S. will leave in place is the ability to unilaterally raise tariffs again if they feel that China is not complying. So I think the uncertainty that hangs over U.S. supply chains won’t necessarily go away,” he added.

And if a truce is called, to some it will feel like a case of déjà vu as this is what happened at the G20 summit in Argentina in December, only to break down last month when the U.S. accused China of reneging on a number of commitments it had previously made.

That resulted in the U.S. increasing tariffs on $200 billion worth of goods from 15 to 25 percent and China retaliating with its own levies. Trump then also threatened to add duties to all remaining exports from China unless it acquiesced.

Steve Lamar, executive vice president at the American Apparel & Footwear Association, thinks the playing field is now different from what it was in Buenos Aires.

“I think we’re past Argentina. That’s good and bad,” he said, explaining that it’s good because he thinks the two sides are a lot closer to a deal. It’s bad, though, because the U.S. and China were just disputing an increase to 25 percent on $200 billion worth of tariffs, but that has since happened and the U.S. is now targeting another $300 billion.

That leads to the question that if the U.S. halts its latest tariff plans, would it also roll back previous rounds of levies?

According to Erin Ennis, senior vice president of the U.S.-China Business Council and former trade negotiator for the U.S. government, the prospect is unlikely.

“I don’t think that there is going to be an announcement that lists 1, 2 and 3 are going to be suspended. It may be that list four is not implemented,” she told WWD. “There is no indication that the administration is about to change its mind that tariffs are how you keep the pressure on a trading partner.”

Whatever happens, one thing is certain — the stakes are high. Earlier this week, analysts at investment bank UBS warned that if the situation escalates, it estimates “global growth would be 75 [basis points] lower over the subsequent six quarters and that the contours would resemble a mild ‘global recession’ — similar in magnitude to the eurozone crisis, the oil collapse in the mid-1980s and the ‘Tequila’ crisis of the 1990s.”

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