Trump’s Newest China Tariffs Are Going To Hurt Americans

The new round of tariffs on Chinese made goods that the President announced late last week will have a particularly severe impact on consumers and retailers.

As I noted on Friday, the President announced a new round of tariffs on roughly $300 billion in Chinese goods, this time consisting largely of consumer goods such as iPhones, toys, and consumer electronics. The inevitable result of all of this, of course, will be higher prices for American consumers at a time when consumer spending is an even more important part of the economy than usual:

Earlier rounds of tariffs mostly focused on industrial goods, but the 10 percent levy announced Thursday is directed squarely at consumer items like clothes, toys and footwear.

That is bad news for, among others, shoemakers and the stores that sell their products, said Matt Priest, the chief executive of the Footwear Distributors and Retailers of America. Less than 1 percent of shoes are made domestically, and China is the source of 70 percent of the goods imported into the United States.

“We’re very concerned this will be a long-term cost baked into what consumers will pay,” Mr. Priest said, adding that he was not expecting exclusions to be made for footwear.

“Nearly every type of shoe is made in China, so there will be impact across the board,” he said. The only exceptions are some high-end leather shoes that are made in Europe.

With some consumer products, the supply comes almost entirely from China, said David French, senior vice president of government relations at the National Retail Federation. He cited umbrellas, electric blankets and toys.

“Trump is feeling very muscular right now,” Mr. French said. “But the next round of tariffs will hit the president’s base particularly hard. The people who voted for him in 2016 felt economically vulnerable. The tariffs will cause job losses and higher prices for everybody but especially his base.”

The most prominent American company bracing for the tariffs is Apple, which typically unveils new products every September.

In a letter in June, Apple urged Robert E. Lighthizer, Mr. Trump’s top trade adviser, not to proceed with any new tariffs. The company warned that such tariffs would hamper its global competitiveness and reduce its contribution to the United States economy. Apple also said that new tariffs would tilt the playing field in favor of its global rivals.

Thus far, Mr. Trump has shown little sympathy for Apple. Last month, after the company filed 15 tariff-exclusion requests, he said that they would be denied and that the company should make its products in the United States.

And, of course, if the tariffs do go forward, there will be the inevitable Chinese retaliation. In that regard, it’s important to note that China’s options as far as tariffs are far more limited due to the fact that American imports into China are far smaller than Chinese exports. Much of what China imports consist of finished goods and agricultural products, many of which have already been subjected to tariffs thanks to Chinese retaliation for previous Trump tariffs. That means that Beijing is likely looking at other options to strike against

The trade imbalance between the two countries leaves China with limited options for imposing additional tariffs on imports from the United States. Beijing could introduce different kinds of barriers, including surprise inspections, license rejections for American companies or a broadening of China’s “unreliable entities” list.

Analysts have also suggested that China could consider curbing exports of so-called rare-earth minerals to the United States, reinstate a tariff on American cars or continue to shun soybeans from American farmers.

Throughout the yearlong dispute, China and the United States have continued to talk through their disagreements. China’s next move may be to give the silent treatment a try.

Even leaving aside the impact that the economy may feel from Chinese retaliation, though, the President’s tariffs on consumer goods will hit at the worse possible time of the year:

The L.O.L. Surprise! House, a three-story doll house with a working elevator and heart-shaped swimming pool, was one of last year’s best-selling holiday toys.

Now it’s one of millions of items caught in the middle of the Trump administration’s growing trade war with China. If President Trump’s newest tariffs take hold, the $199 doll house will cost $250, according to its manufacturer.

“There is no question: We have to raise prices, which means consumers are going to be paying 30 to 40 percent more for toys,” said Isaac Larian, chief executive of MGA Entertainment, which makes popular brands like Bratz, Little Tikes and Poopsie Slime Surprise! “We’re in peak holiday season — the orders are in, factories are manufacturing toys and getting ready to ship them out right when these tariffs are going to hit.”

Trump tweeted Thursday that he would impose a 10 percent tax on $300 billion worth of Chinese imports — including t-shirts, toys and televisions — beginning Sept. 1. While consumers have been largely shielded from earlier tariffs, the newest round would raise prices on just about everything Americans buy. More than 60 percent of the affected items are consumer goods, according to an analysis by Goldman Sachs.

The price of toys would rise by about 17 percent, shoes by 8 percent, clothing by 5 percent, and furniture and TVs by 4 percent, according to a report by the Trade Partnership, prepared for the National Retail Federation. The cost of laptops and tablets is expected to rise $50 to $120, while smartphones will cost an extra $70, according to the Consumer Technology Association.

Executives at Columbia Sportswear say they have already told retail customers to expect higher prices in the coming months. “Some prices will go up. We don’t know exactly which ones or by how much — but what we know is there will be increases across the industry,” said Peter Bragdon, the company’s chief administrative officer.

Retailers say the timing couldn’t be worse. The tariffs are scheduled to go into effect just as they begin their fourth quarter, a make-or-break period that often determines whether they have a profitable year.

The industry has faced its share of turmoil in recent years. The rise of online shopping, coupled with growing competition, has driven down profits and led to dozens of retail bankruptcies since 2017. Retailers have already announced plans to close more than 7,500 stores this year, and analysts say new tariffs could lead to thousands of additional closures and job losses.

“These tariffs will only threaten U.S. jobs and raise costs for American families on everyday goods,” David French, senior vice president for government relations at the National Retail Federation, said in a statement. “The tariffs imposed over the past year haven’t worked, and there’s no evidence another tax increase on American businesses and consumers will yield new results.”

He and others warned that raising prices on everyday goods could have a chilling effect on the overall economy. Consumer spending makes up roughly 70 percent of the U.S. economy, and the retail industry accounts for one-fourth of the country’s jobs.

For each year the tariffs are in effect, American shoppers would pay $4.4 billion more for apparel, $2.5 billion more for shoes, $3.7 billion more for toys and $1.6 billion more for household appliances, according to the Trade Partnership. Those increases come on top of earlier tariffs, which had already imposed a 25 percent tax on $250 billion worth of Chinese imports as varied as suitcases, garden tillers and dog sweaters

“We survived the Great Depression, we survived the Second World War, but what we’re facing now — it’s hard to believe we’re even in America anymore,” said Lance Ruttenberg, chief executive of American Textile Company in Pittsburgh, which makes bedding for brands like Sealy and Tempur-Pedic. “This is debilitating for businesses and for consumers.”

Companies of all sizes are likely to feel the pinch of higher prices — and slowing demand. Sales of Apple iPhones, for example, could fall by up to 8 million units in the coming year if the company passes a 10 percent price hike on to consumers, according to Dan Ives, an analyst for Wedbush Securities. He said Apple, which sources the majority of its products in China, has become a “poster child” for the trade war.

“The tariff news throws a mini wrench in iPhone demand, which will weigh on shares,” Ives wrote in a Thursday research note. “These latest tariffs could significantly increase the cost of iPhones globally.”
Apple’s stock price has fallen more than 5 percent since Trump’s Thursday afternoon tweet. Shares of Best Buy are down 9 percent, while Target’s stock is down about 5 percent.

None of this should come as a surprise, of course. Contrary to everything that the President has said, tariffs on imports ultimately end up getting paid for by end-users and consumers. In this case, the fact that the end-user is the American consumer means that higher prices for a whole host of consumer goods just on the eve of the most important period for American retailers of the entire are inevitable. This will likely translate into lower consumer spending in response to the higher prices, and greater pain for a retail industry already facing pressure from competition with online shopping. This could lead to problems for already struggling retailers such as J.C. Penny and Sears, both of whom have been close to the edge of extinction for years now. Other retailers, such as WalMart and Target, will likely be able to withstand the bad winds due to the fact that they’ve both developed relatively robust online shopping divisions.

These new tariffs, if they are imposed, are likely to have an even bigger impact on consumers than previous rounds of tariffs have. In part, this is because previous tariffs have largely tried to avoid increasing the prices of consumer goods in ways that would make it noticeable. To a large degree, though, we’ve run out of ways to avoid placing tariffs on consumer goods and so here we are. This is why retailers are warning the Administration that these latest round of tariffs would result in higher consumer prices and layoffs in the retail industry. Additionally, the fact that these tariffs, which could rise to as high as 25% according to reports, would go into effect as the economy is shifting toward the holiday shopping season could mean that the impact on the economy is even more widespread than forecast.

Taking all of this into account, it’s no surprise that world stock markets reacted negatively to the news about the renewed trade war and that American markets are responding in kind. As I write this, the Dow Jones Industrial Average is down more than 800 points, representing a 3.3% drop in value, while the broader S&P 500 is down nearly 100 points, also representing a 3.3% drop, and the NASDAQ is down more than 300 points, representing a drop of nearly 3.9%. This is happening because, unlike the President, who continues to believe that “trade wars are good and easy to win,”  The truth is that they are bad, and everyone loses.

FILED UNDER: China, Donald Trump, Economics and Business, International Trade, Politicians, US Politics
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. Neil Hudelson says:

    China has responded in two ways. The first–allowing its currency to fall in value compared to the dollar–is fueling the market plunge. But the second act is going to hurt just as much: they’ve suspended all agricultural purchases from the U.S. This at a time when farmers are already reeling from historic flooding due to the totally made up Chinese hoax of global warming. What little farmers have been able to plant, they now cannot sell in one of the biggest markets.

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  2. Daryl and his brother Darryl says:

    What is the POTUS going to do when China gets tired of his nonsense and just stops buying our debt? We are borrowing from China to pay for our trade war with China. BRILLIANT!!!
    Trump may have managed an under-grad degree from Wharton…but I’m betting he failed ECON101 at least once.

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  3. Teve says:

    What is the POTUS going to do when China gets tired of his nonsense and just stops buying our debt?

    China owns 5% of US debt, so it would hardly matter.

  4. Daryl and his brother Darryl says:

    @Teve:
    well…I never took ECON101…obviously….

  5. Teve says:

    “We survived the Great Depression, we survived the Second World War, but what we’re facing now — it’s hard to believe we’re even in America anymore,” said Lance Ruttenberg, chief executive of American Textile Company in Pittsburgh, which makes bedding for brands like Sealy and Tempur-Pedic. “This is debilitating for businesses and for consumers.”

    okay just calm the fuck down, Lance.

  6. Kathy says:

    Devaluing the currency has all sorts of nasty side effects. Should Dennison accept Xi’s invitation to a currency war, expect a devalued dollar to bring in higher interest rates and inflation. That’s the natural consequence of your currency losing some of its value, even if exports are likely to rise.

    The big catch is exports require investment in plant capacity, land, labor, materials, etc., which takes time. Meanwhile, higher interests and inflation hits everyone at once right away. This will also mean a bigger deficit, as more money will have to go to service the debt. the new debt taken to cover that will cost more, driving the vicious circle further along.

    One additional risk is for the Dollar to lose standing as a global reserve currency. I don’t think Americans quite realize how much the US Dollar serves as a standard globally, or is used to transfer payments and to store wealth all over the world. One side effect of this is the very wide acquisition of US debt by investors and states. That could end or diminish.

    The really scary part is you have a true ignoramus in charge of making such decisions.

  7. Teve says:

    It’s been 927 days since Trump became president. We just have to make it 534 more.

  8. Just nutha ignint cracker says:

    @Teve: And then we can move to chants of “Keep America Great” and “Four More Years.” I think it was HL Mencken who said no one ever went broke underestimating the intelligence of the American public.

    I guess we can hope that Trump will be the first, though.

  9. Teve says:

    @Just nutha ignint cracker: if Trump gets re-elected you’ll find me a week later in some remote Italian village teaching English. 🙂

  10. Mikey says:

    @Teve:

    534 more

    You’re not helping.

  11. An Interested Party says:

    This idiot has given the Democrats so much to use against him…if they can’t win next year they deserve to lose to this trash…unfortunately, all of us will be paying the price for that…

  12. Sleeping Dog says:

    Morgan Stanley: If the trade war escalates, a recession will be here in 9 months

    Just in time for the start of the campaign season. Here’s hoping Morgan Stanley correct, because it will be bye-bye Tiny.

  13. MarkedMan says:

    Two things. First, devaluing the currency is not a risk free strategy for China by any means. They have spent more than two days slowly building up the credibility of the renminbi and in one fell swoop they have shown that to be a charade.

    Second, only a modern day Republican would be simplistic enough to think that simply giving a certain tax a specific name that doesn’t contain the word “tax” (aka “tariff”) it ceases to be a tax.

  14. An Interested Party says:

    Second, only a modern day Republican would be simplistic enough to think that simply giving a certain tax a specific name that doesn’t contain the word “tax” (aka “tariff”) it ceases to be a tax.

    How the world turns…Republicans used to be against taxes, big government, and deficit spending…what some people are willing to do to cozy up to power is really quite pathetic…

  15. An Interested Party says:

    Now that I think about it, Republicans used to be for civil rights for ethnic minorities, including not trying to deny them the right to vote…it’s no wonder Will Hurd is heading for the exit…

  16. Guarneri says:

    American workers be damned. American intellectual property investment be damned. As long as you can get your too frequently purchased iPhones, tee shirts and doll houses $5-$25 bucks cheaper.

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  17. Neil Hudelson says:

    @Guarneri:

    *yawn*

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  18. michael reynolds says:

    @Guarneri:
    You elected a moron because you wanted to spite people like me. It’s not working, is it? You’re on the defensive, we’re all laughing at you, and even the pleasure you take in the racism and misogyny doesn’t quite overcome the sinking feeling that comes with currency war.

    A flatlined stock market, a flailing trade war, and now currency devaluation. Meanwhile the farm belt goes under. So of course you want to come here and yell at us. Of course it doesn’t matter to you till it involves a dollar sign. The lying, the hate, the corruption, the treason, the international humiliation, you’re fine with all that. But oh no: money!

    Guys like you make my skin crawl.

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  19. michael reynolds says:

    What China did today reminds me of nothing so much as the Tet offensive, that moment in a war when you go, Uh oh. The Germans at Stalingrad and Kursk. The Japanese after Midway. Gettysburg. When that officer in Iraq admitted he didn’t have enough troops to maintain control. Not Cannae, that’s not it, it’s not annihilation, it’s just the moment when you realize, Oh, we’re gonna lose.

    It’s not a huge thing in and of itself, but as a statement of intention it ain’t good.

    Our Chinese friends don’t seem to be overshocked or overawed. On the contrary, we’ve given them a diversion, cover, for when they move against Hong Kong. Rising nationalist sentiment – fed by our Cretin-in-Chief – strengthens Xi’s hand in a wonder of good timing. For them.

    Trade wars are not easy to win, certainly not when they’re being fought by a fcking imbecile.

  20. An Interested Party says:

    What China did today reminds me of nothing so much as the Tet offensive, that moment in a war when you go, Uh oh. The Germans at Stalingrad and Kursk. The Japanese after Midway. Gettysburg. When that officer in Iraq admitted he didn’t have enough troops to maintain control. Not Cannae, that’s not it, it’s not annihilation, it’s just the moment when you realize, Oh, we’re gonna lose.

    It’s still possible to get rid of the idiotic general leading this stupid war…

  21. Just nutha ignint cracker says:

    @Teve:

    if Trump gets re-elected you’ll find me a week later in some remote Italian village teaching English.

    My experience is that those types of jobs are harder to find than they used to be, but my problem may be that I’ve been looking for mostly short-term teaching. (Also, I’m not looking as hard as I might. 😀 )

  22. MarkedMan says:

    @MarkedMan: Whoops. That should have been “two decades” not “two days”

  23. OzarkHillbilly says:

    @MarkedMan: Heh, I wondered about that.

  24. Pete S says:

    @michael reynolds: and he pretends to be standing up for American workers. Walmart wasn’t always a behemoth. Consumers had the choice to have less stuff, at a price that would allow American workers to make a good wage. We made our choice, it is too late to go back. All we can get now is higher prices from tariffs bumping up government revenue to finance another tax cut for the investor class.

  25. Daryl and his brother Darryl says:

    @Guarneri:
    @michael reynolds:
    China is a bad actor. No question.
    A mindless trade war, that harms almost everyone but China, is NOT the way to handle it. If Drew was half the businessman he claims to be, he would know that.
    What has Trump accomplished?
    Slowed job growth.
    Slowed GDP growth.
    A flat stock market.
    Farmers being decimated, between climate change and these tariffs.
    NoKo still popping off rockets.
    Iran processing more nuclear material.
    An immigration situation that is FAR worse than when he took office.
    A rapid growth in hate crimes and white supremacy.
    A massive increase in deficit spending during a non-recession period.
    Trump is a failure and a fraud.
    Guarneri and his bunch just don’t have the cojones to admit it.

  26. michael reynolds says:

    @Daryl and his brother Darryl:
    The true culties identify so closely with their orange god that they are no longer capable of objectivity. When you go all-in that way, especially when you are warned by everyone with a brain that you’re making a stupid mistake, there’s no walking it back.

    @Guarneri and his ilk are the kind of men who were with Hitler in his bunker. Too compromised, their depravity too nakedly exposed, they can’t even flee west to surrender to the Americans and the Brits. They’ll go swirling down the toilet with their two-bit conman and there will be neither forgiveness nor redemption. Ten years from now Drew will be in his rocking chair peeing into a diaper and still muttering about Hillary, a hollowed-out relic of an evil time.

  27. Neil J Hudelson says:

    @michael reynolds:

    That’s mighty charitable of you to give Drew a decade. All available evidence says he’s already stocked up on pampers.

  28. Just nutha ignint cracker says:

    @Neil Hudelson: I was wondering if he was starting to embrace the inner Guarneri that we all know and love, but your reaction works, too. 😛

  29. wr says:

    @Guarneri: Hey Drew,

    Your adorable little vice-president just said you should spend less time on the internet and more time on your knees. It’s actually kind of hard to imagine how a pewling lickspittle like you could actually spend more time on his knees in front of your orange godling, but perhaps you could follow the first half of his advice.

  30. Jean-Luc Anglada says:

    @Daryl and his brother Darryl: Good point gentlemen! Not many people raising this point. I have argued that it would be the ultimate and the deadliest weapon from China since September last year. The Chinese can give up the Fed Funds and still find ample supply of government bonds issued in US$ (or other currencies) from issuers as good or better than the USA, so beware: this might be the end of Trump’s policy when the US face a cash shortage. Anyway, with the trade war and the drop of the Chinese economic growth, the cash hoard of China will shrink and they will naturally reduce their Government bonds investment… notwithstanding the fact that they invest more and more massively in real economic projects, n agriculture, transportation, energy… outside China but unlikely in the USA where they are not welcome anymore to say the least. “A suivre” !