US-China ‘phase one’ deal is not a win for the apparel industry, trade group says

US President Donald Trump speaks after announcing and initial deal with China while meeting the special Envoy and Vice Premier of the People’s Republic of China Liu He at the Oval Office of the White House in Washington, DC on October 11, 2019.

Nicholas Kamm | AFP | Getty Images

As the U.S. and China close in on an interim trade deal that would thaw tensions between the two economic powerhouses, the American Apparel & Footwear Association (AAFA) said it is “incredibly not happy” over the situation.

“We don’t see a win for us in this deal,” Rick Helfenbein, president and CEO of the trade organization, told CNBC’s “Squawk Box” on Monday. “At the end of the day, we hope these tariffs will go away and that will make a difference.”

Last month, the U.S. and China reached a truce and started working to finalize a “phase one” trade agreement that includes a pause in tariff escalation and Chinese purchases of U.S. agriculture products.

U.S. Commerce Secretary Wilbur Ross said Sunday that the agreement could be signed by American President Donald Trump and Chinese President Xi Jinping in one of several locations, including Iowa, Alaska, Hawaii or somewhere in China. 

The deal was originally supposed to be signed at this month’s Asia-Pacific Economic Cooperation summit in Chile, but the event has since been canceled due to protests in the country. The White House said it still plans to ink the deal “within the same time frame.”

“On one hand, we’re really, really happy everybody’s talking,” Helfenbein said. “But for our industry, in particular, there’s nothing in this deal for us. We’re under tariff now. We will remain under tariff.”

“We’re really glad that the interest rates went down last week because we have to borrow money now to pay for these tariffs,” he added, in reference to last month’s decision by the U.S. Federal Reserve to cut its benchmark funds rate by 25 basis points.

China: An ‘integral part’ of the supply chain

As the holiday season approaches, Helfenbein acknowledged that the sector is likely to “struggle” through the period and has already “given it up.”

“When are these tariffs going to go away because we rely on China. We need China,” he said. “China is an integral part of our supply chain.”

As a result of the tariffs placed by Washington on Beijing’s exports, Helfenbein said: “We have to reduce our exposure in China, which is something, quite frankly, we don’t want to do and it’s very difficult to do.”

“Onshoring is not going to happen,” the trade group leader admitted. “We don’t have the facility to do it. We don’t have the ability to do it.”

“We don’t have a place to go but China and we’re just going to have to pay those tariffs,” Helfenbein said.

— CNBC’s Yun Li contributed to this report.

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