See which industries will feel the most pain from a China-U.S. trade war
The U.S.-China trade war is set to enter a new phase, one expected to be so costly that it will take away much of what Americans gained from the 2017 tax cut.
But experts say there is good news for consumers: the effect of the new tariffs slated to be implemented Sunday won’t be felt right away.
“The impact won’t be immediate. You won’t all of a sudden be paying more, but it (the tariff impact) will trickle down to the consumer,” said Melissa Miller, senior manager at the World Trade Center Kansas City, which promotes international trade.
There are a host of reasons that the impact will be delayed: Suppliers have imported items already and are looking for alternatives to dealing with China. And retailers are applying pressure to suppliers to hold costs. But experts agree that such strategies are stopgaps and prices are likely to spike.
There are 122 pages worth of tariffs set to go into effect this weekend on clothing, toys, food -- “items that most consumers prefer,” said Scott Eastman, federal research manager at the Tax Foundation, a Washington-based research group.
Eastman calculated that by the end of the year that Trump administration-imposed tariffs that are already in effect and are scheduled to take effect are estimated to cost a family of four a total of $1,467.
The price hit would be enough to wipe out a big chunk of the federal tax cut Trump signed into law in 2017. The Tax Foundation estimates that a family of four earning $85,000 received a tax cut of about $2,250 last year, a 3% boost in take-home pay.
The government plans a 15% tariff on many consumer goods from China starting Sunday. Previous tariff rounds have largely dealt with “intermediate” items, such as parts for machinery or raw materials.
Items subject to the tariff include certain disposable footwear, tablecloths and dishcloths, lettuce and tomatoes, wigs and wool, women’s blouses and men’s bathrobes, baby clothes and pacifiers, sunglasses and contact lenses.
In October, a 25% tariff already in effect on certain items, including some juices, seafood and produce, will jump to 30%.
And on December 15, a new tariff is to be applied to another list of Chinese imports, including consumer electronics such as video game consoles and cell phones.
The direct impact of the tariffs in the marketplace is likely to come slowly, even subtly. Consumers are not likely to walk into a store Sunday and suddenly see higher prices because of the tariffs.
While the Sunday tariffs affect many back-to-school items, most shoppers have already bought what they need, said Chad Bown, senior fellow at the Peterson Institute for International Economics.
Similarly, any immediate sting from the next big round involving consumer electronics could be gentle since the tariff on many popular items is to begin 10 days before Christmas. Most retailers will have bought their supplies long before that, and most people will have bought big purchases prior to December 15, Bown said.
In addition, retailers have several strategies to ease the price pain, at least in the short term.
“It’s possible you may see products in similar packaging but in smaller quantities that sell for the same price,” said David French, senior vice president for government relations at the National Retail Federation.
Other options for retailers to avoid big price hikes, according to French, including importing supplies into the U.S. before the next round of tariffs take effect or seeking out alternative suppliers outside of China.
Other ways around big price hikes: Pressure suppliers to lower costs, said Kansas City’s Miller, although sellers have to be careful not to jeopardize longstanding relationships.
Consumers, too, adopt strategies to ease price increases. Alan Tonelson, an economic policy analyst, notes that consumers still have vivid memories of last decade’s recession and have become accustomed to bargain hunting.
He also was wary that consumers will be unduly hurt by the tariffs, noting that inflationary pressure has been low for years and shows no signs of erupting.
“I’m dubious that the Trump tariffs will hit consumers hard or even noticeably,” said Tonelson, a frequent free trade critic.
The White House agrees. Of the tariffs already in place, “there’s no evidence whatsoever that American consumers are bearing any of this,” Peter Navarro, director of the White House office of trade and manufacturing policy, told ABC’s “This Week.”
He maintained that China is feeling the sting, and ultimately Trump will negotiate a fair trade pact. “This president is committed to standing up to China and getting a good deal for the American people. And he will continue to do what needs to be done,” Navarro said.
Friday, Trump tweeted, “We don’t have a Tariff problem (we are reigning in bad and/or unfair players), we have a Fed problem. They don’t have a clue!”
Other experts, as well as those involved in sales and production, see a different scenario.
“The impact will ultimately show up,” said Bown.
Certain television sets, digital cameras, smart watches and other consumer technology items from China are due for the higher tariffs Sunday. Many of the manufacturers have already been hit by earlier tariffs on their materials.
Sellers have tried to absorb any price increases, hoping for delays or an end to the tariffs, said Bronwyn Flores, policy communications specialist at the Arlington, Va.-based Consumer Technology Association, which represents 2,200 companies.
Imposing higher tariffs on the finished product changes things, she said. “You’ll see prices start to rise at the end of 2019 on the actual product,” Flores predicted.
Tiffany Williams has seen how all this works. She and her husband own the Luggage Shop of Lubbock in Texas. Tariffs were imposed on imported luggage last year, then increased again.
Consumers often go to a specialty store such as theirs to buy a higher end, higher quality product. Suppliers at first tried to hold down prices, but the second round of tariffs was too much to absorb, so a $400 suitcase suddenly jumped to around $500.
After 10 years of growth, “overall business is down this year,” Williams said.
She doesn’t have any easy solution. “I appreciate getting tough with China,” she said. “But I also wish Washington would listen to the people out here. Their decisions affect real people.”