Wed | Sep 18, 2019

TVs to shoes: This time consumers face pain of Trump tariffs

Published:Sunday | September 1, 2019 | 12:27 AM

In this photo taken on Wednesday, August 28, 2019, Jennifer Lee, whose family owns Footprint shoe story in San Francisco, points to a wall of athletic shoes, many of which are made in China and will be subject to new US tariffs on Chinese goods, starting September 1.
In this photo taken on Wednesday, August 28, 2019, Jennifer Lee, whose family owns Footprint shoe story in San Francisco, points to a wall of athletic shoes, many of which are made in China and will be subject to new US tariffs on Chinese goods, starting September 1.

President Donald Trump’s trade war with China, until now mainly an abstraction for American consumers, is about to hit home.

Beginning Sunday, the US government will begin collecting 15 per cent tariffs on $112 billion in Chinese imports – items ranging from smart watches and TVs to shoes, diapers, sporting goods and meat and dairy products. For the first time since Trump launched his trade war, American households face price increases because many US companies say they will be forced to pass on to customers the higher prices they will pay on Chinese imports.

For more than a year, the world’s two largest economies have been locked in a high-stakes duel marked by Trump’s escalating import taxes on Chinese goods and Beijing’s retaliatory tariffs.

The two sides have held periodic talks that seem to have met little progress despite glimmers of potential breakthroughs. All the while, they have imposed tariffs on billions of each other’s products in a rift over what analysts say is Beijing’s predatory tactics in its drive to become the supreme high-tech superpower.

American consumers have so far been spared the worst of it: The Trump administration had left most everyday household items off its tariff list (valued at $250 billion in Chinese products so far) and instead targeted industrial goods.

That is about to change. When Trump’s new tariffs kick in at 12:01 a.m. Sunday, 69 per cent of the consumer goods Americans buy from China will face his import taxes, up from 29 per cent now.

That isn’t all. Higher tariffs are set to kick in for another batch of Chinese products – $160 billion worth – on December 15. By then, roughly 99 per cent of made-in-China consumer goods imported to the United States will be taxed, according to calculations by Chad Bown of the Peterson Institute for International Economics.

Overall, Trump’s trade war will have raised the average tariff on Chinese imports from 3.1 per cent in 2017, before the hostilities began, to 24.3 per cent.

“The bottom line is that for the first time, Trump’s trade war is likely to directly raise prices for a lot of household budget items like clothing, shoes, toys, and consumer electronics,” Bown wrote in a report.

For months, Trump – who famously declared that trade wars are “easy to win” – falsely claimed that China itself paid the tariffs and that they left Americans unscathed. In fact, US importers pay the tariffs. They must make a high-risk decision: whether to absorb the higher costs themselves and accept lower profits or pass on their higher costs to their customers and risk losing business.

This has become an ever-more-difficult decision. After years of ultra-low inflation, consumers have grown more resistant to price hikes, especially when they can easily compare prices online for household products and choose the lowest-price options. For that reason, many retailers may choose not to impose the cost of Trump’s higher tariffs on their customers.

And the higher costs US importers face could be offset somewhat by the declining value of China’s currency, which has the effect of making its products somewhat less expensive in the United States.

Still, the prices of certain goods will cost Americans more. Trump tacitly acknowledged this a few weeks ago by announcing a delay in his higher tariffs on $160 billion in imports until December 15 – to keep them from squeezing holiday shoppers.

Even before the December tariffs, though, 52 per cent of shoes and 87 per cent of textiles and clothing imported from China were to be hit by Trump’s tariffs, according to Peterson’s Bown. And not even counting the increase – from 10 per cent to 15 per cent – that Trump announced for his new tariffs a week ago, J.P. Morgan had estimated that his import taxes would cost the average household roughly $1,000 a year.

“The story that holiday goods (were) given a reprieve is fake news,” said Stephen Lamar of the American Apparel and Footwear Association. Overall, the 15 per cent September and December tariffs will force Americans to pay an extra $4 billion a year for shoes and boots, according to a footwear trade group.

AP