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With tariffs looking set to remain in place for the long term, companies are trying to adjust to this new normal. Some are accelerating shipments, looking for new suppliers and buyers, and petitioning the U.S. government for relief. Motley Fool analysts Jim Mueller and Nick Sciple break down these and other tariff avoidance strategies on this segment of Industry Focus: Energy.
A full transcript follows the video.
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This video was recorded on Sept. 27, 2018.
Nick Sciple: Jim, let’s talk a little bit about, where does this go long-term? If we’re looking out 18 months from now, where do we think we’re going to be looking at with tariffs? What are the things we’ll see develop to play this out?
Jim Mueller: Probably, we’ll have the last $250 [billion to] $260 billion worth of Chinese imports under tariff as well. I don’t expect China to cave in at the first sign of trouble. Actually, I don’t expect China to cave. They might come to a negotiate a settlement, but that’ll be difficult, especially if one side or the other is trying to do a win-or-lose situation and nothing in the middle. That’d be difficult. We could probably expect these kinds of things to last for a while.
One of our expectations is that China has the motivation to liberalize its economy and bring more of a free market economy to the country. But what we might not have realized is that the Chinese Communist Party is still in very much firm control inside China. That has to play into any calculus on thinking forward.
Sciple: Right. I think there are a few signs of some cracks in the clouds, not directly related to China. This Monday, the administration announced a deal with South Korea to expand the ability for the U.S. manufacturers to import their products into South Korea. We saw a deal just yesterday between President Trump and Japanese Prime Minister Shinzo Abe with the relation to starting some trade talks, and in exchange for that, holding off on some potential tariffs on Japanese automakers. We’re seeing some cooperation between the United States, the European Union, and Japan to try to start pushing, changing some WTO rules to limit China’s ability to use state subsidies and forced technology transfers, like we discussed earlier.
In the near term, I don’t think there’s any expectation that these things are going to go away.
Mueller: I don’t think so.
Sciple: For China to get nudged to back off from this position, it’s really going to take a village, it’s going to take the United States, our European allies, Japan to really work together.
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