On May 9, the Office of the United States Trade Representative (USTR), which is the American agency responsible for developing and recommending U.S. trade policy, proposed a raising an already existing levy of 10 percent to 25 percent on 3,805 items products from China. The ultimate goal, the USTR said, was to levy tariffs of up to 25 per cent on almost all of China’s remaining exports to America, estimated to be worth about $300 billion.
Among the goods that could be affected are natural and laboratory-grown diamonds, pearls, rubies, sapphires, emeralds and other colored gemstones, gold and silver jewelry parts, toy jewelry, imitation jewelry and religious items. Finished fine jewelry items, at this stage, appear to be largely unaffected.
It is not yet a done deal. But the Trump administration seems intent on ratcheting the pressure on China. This despite the fact that most economists insist that the mounting trade war will be counter-productive.
NDIA CONSIDERS FALLOUT OF TRADE WAR WITH AMERICA
And China is not the only country in President Trump’s sites. Earlier, the Trump administration said that it planned to revoke the special status granted by the United States to India under the World Trade Organization (WTO) rules, which has provided Indian exports access to the U.S. market at relatively low rates.
Trump earlier had complained that India closes its markets to U.S. exports, specifically citing a 100 percent levy on imports of Harley Davidson motorcycles. This actually was incorrect. The current Indian import tax on American-made motorcycles is 50 percent, and that is down from 75 percent just one year back.
But unlike China, India has been reluctant to strike back against the Trump administration, postponing a set of retaliatory tariffs on some key exports from the United States. Still, it was scheduled to impose punitive tariffs on 29 items from June 16.
The escalating U.S.-China trade war could come to affect both are natural and laboratory-grown diamonds, as well as pearls, rubies, sapphires, emeralds and other colored gemstones. Finished jewelry may be off the hook.
If there is a hard Brexit, the United Kingdom could effectively find itself locked out of the Kimberley Process Certification Scheme, the international system designed to prevent conflict diamonds from entering the chain of distribution.
As it is, Indian pundits are expecting a windfall from the current U.S.-China trade war, as Chinese manufacturers search for alternative export markets. With its population of 1.3 billion and one of the fastest growing middle classes globally, more than any other country India provides a most ready-made market for these Chinese products looking for customers others than Americans.
There also will be opportunity for India in the United States. The United Nations Conference on Trade and Development has estimated that of the $300 billion in Chinese exports that will be subject to U.S. tariffs, about 82 percent will be captured by firms in other countries. About 12 percent will be retained by Chinese firms, and only about 6 percent will be taken over by American companies.
THE UK DIAMOND TRADE CONSIDERS A NO DEAL BREXIT
The U.S.-Chinese trade war is not the only case of self-imposed chaos. In the United Kingdom, the crawl toward a divorce from the European Union continues, despite the recent decision of the British government to delay a final decision on whether to undergo a hard Brexit.
If there is a hard Brexit, the United Kingdom would effectively find itself locked out of the Kimberley Process Certification Scheme, the international system designed to prevent conflict diamonds from entering the chain of distribution, by restricting the trade in rough diamonds to countries that are Kimberley Process compliant. The problem is that the United Kingdom does not have independent KP membership, but is affiliated to the system through its being part of the European Union.
It currently is agreed that the EU will treat the United Kingdom as a member state for the purpose of the KP until December 31, 2020. But if the UK leaves the EU without a deal, British businesses will not be able to trade internationally in rough diamonds until the country has secured independent participation in the KP.
According to the British government, it has already applied for KP participation, to take effect from the point at which the UK is no longer represented by the EU. It also says that it has prepared the secondary legislation necessary to enact the KP in the UK, and will have ready a new UK KP certificate to replace the EU one.
But given the haphazard way in which it has managed the Brexit process, there is general skepticism in the diamond industry that the transition will be as smooth as the British government suggests.
Interesting times indeed.