Much is still unknown about how the US/China Trade Wars will play out. One thing we do know is that it was initiated by the United States (US) President Donald Trump, and characterized by increasing tariffs and other trade barriers with China. The desired outcome or end game being that China would be forced to make changes to what the US believes are unfair trade practices. The US and China are respectively the two largest national economies in the world. As with any major political agreement, there is an endless amount of speculation about how it could impact the two countries involved.

US China trade war

To ensure everyone is on the same page, a few clarifications are in order. Understanding the different types of costs involved is key to evaluating the situation. To that end, let us clear up any semantic type of issues with the following definitions:

Tariff – a tax or duty to be paid on a particular class of imports or exports
Duty – a payment levied on the import, export, manufacture, or sale of goods
Tax – a compulsory contribution to state revenue levied by the government on workers’ income and business profits or added to the cost of some goods, services, and transactions

Among many other areas of commerce, the Hair Restoration and Hair Replacement industry are “not-so-patiently” waiting to see what President Donald Trump and Chinese Premier Li Keqiang will ultimately agree upon and pen to paper. Two very specific types of product categories are the focus point. HTS6703 includes the human hair product line, and HTS6704 includes wigs and artificial eyelashes. In July 2019, both of these categories were included on the hit list by the United States for increased tariffs imposed on China. This sent a shock wave through the industry, with many US suppliers of these products increasing costs to their customers.

Chinese hairpiece factory

Chinese hairpiece factory

It might be said that their reaction was proactive from a balance sheet bottom-line perspective. Maybe they consulted their crystal balls or trusted mediums and generously paid a higher rate to the Chinese vendors in anticipation of any tariffs being raised.
On the other hand, many believe their reaction was more reactive and premature. After all, weren’t the products they were currently selling already purchased at the lower tariff rates? Didn’t they already have those products sitting on their shelves?

The latter has proven to be the case as both product categories were given a reprieve from an additional tariff burden in September 2019, when they were excluded from the list of products that have increased tariffs placed upon them. This begs the question, will the US suppliers refund any payments made by their customers who were charged for tariff increases that never happened? Will, there be a detailed accounting shown to derive the amount of that refund?

As of the writing of this article, Phase One of the US/China Trade Agreement has been tentatively reached, after almost two years of tariffs and false starts, however not yet signed. The US states that it will not raise tariffs, but will keep tariffs on approximately $250 billion of exports to China, along with 7.5% duties in place on approximately $120 billion of Chinese imports. China has verbally agreed to purchase more US agricultural products over the next few years.

China / USA trade deal phase one

China / USA trade deal phase one

While the world watches and waits, China is completing a legal review and translation to their liking, of Phase One. On the other hand, the US needs confidence that China is negotiating in good faith, along with enforceable changes related to intellectual property and technology transfers (both of which are a priority for the White House). It is hoped that Phase One will be signed upon completion and agreement of those requirements. The jury is still out on what will ultimately happen as this is the fifth time that a deal has been prematurely declared.

Currently, the prevailing school of thought is that a Phase One trade deal could prevent things from getting worse, however, it is not certain that it will make things better between the two countries. In the meantime, both sides have held off on raising existing tariffs.

As with any developing situation, things may change. The Hair Society will continue to keep you abreast of any impacts this pending agreement will have on the hair industry, as well as bringing you information on related topics.