Industry Economists Cautiously Optimistic on US-China Trade Deal
Recently announced 90-day deal takes some pressure off, but much still isunresolved
Tariff talks between the U.S. and China continue with no firm terms established yet for a permanent deal.
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The U.S. and China announced a 90-day trade agreement on May 12 that will allow some breathing room as the two countries continue to negotiate a more permanent deal. Chinese tariffs on many U.S. goods have been dropped from 125% to 10%, while the U.S. lowered tariffs on many Chinese goods from 145% to 30%.
While the news is promising, industry economists remain wary due to the changing nature of the tariffs. “The reduction of tariff rates between the U.S. and China brings some relief to a tense situation,” says Eric Gaus, chief economist at Dodge Data Network. “Uncertainty, however, remains elevated because negotiations will not resolve fully in the next 90 days.”
Gaus also notes that a shortage in goods coming from China is already in the works following the 145% tariffs announced in April. “The major near-term problem is how supply chains unwind since container ships have effectively stopped flowing from China,” he says. “[Dodge expects] a mini pandemic shortage/inflation cycle.”
Many details about the temporary deal are still forthcoming, says Macrina Wilkins, senior research analyst at Associated General Contractors of America, adding to the uncertainty. “Once more information becomes available, [AGC will] carefully review the terms and assess the potential impact on contractors,” she says.
Richard Branch, chief economist at freeagenteconomist.com, calls the new developments “very positive for the construction industry,” adding that it “could reignite planning and construction." Still, he cautions, “The on-again/off-again nature of trade policy and the President's stance that tariffs will resume if a deal isn't finalized highlights the continued risk.
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