(Bloomberg)—Retailers and industry trade groups are pushing back against President Donald Trump’s decision to order tariffs on Chinese goods and try to limit the number of products that are included.
President Donald Trump on Thursday signed an executive memo instructing U.S. Trade Representative Robert Lighthizer to levy tariffs on at least $50 billion in Chinese imports. Within 15 days, USTR will come up with a proposed list of products that will face higher tariffs.
“This has been long in the making,” Trump said, adding that the tariffs could affect as much as $60 billion in goods. “We have a tremendous intellectual property theft situation going on” with China affecting hundreds of billions of dollars in trade each year, he said.
As he signed the tariffs order, Trump told reporters, “This is the first of many.”
Trump also directed Treasury Secretary Steven Mnuchin to propose new investment restrictions on Chinese companies within 60 days to safeguard technologies the U.S. views as strategic, said senior White House economic adviser Everett Eissenstat.
Broad-based tariffs will likely translate into higher prices in U.S. stores because a vast amount of items used by American consumers—including Under Armour leggings, Bath & Body Works shower gel and Samsonite luggage—are sourced from Chinese- or Hong Kong-based companies and factories.
U.S. retailers and their lobbyists have grown increasingly vocal in recent days as the president telegraphed his decision. Walmart Inc., , No. 3 in the Internet Retailer 2017 Top 500, Macy’s Inc. and more than 20 other retailers sent a letter to Trump earlier this week urging him to reconsider the idea.
And retail trade groups argued that the tariffs will hurt U.S. consumers rather than China.
“Taxing American families with widespread tariffs on everyday consumer products clearly misses the mark,” says Hun Quach, vice president of international trade for the Retail Industry Leaders Association. “There is no way to impose $50 billion in tariffs on Chinese imports without it having a negative impact on American consumers. Make no mistake, these tariffs may be aimed at China, but the bill will be charged to American consumers who will pay more at the checkout for the items they shop for every day. This trade tax has the potential to wipe out any gains the average American family received from tax reform.”
Matthew Shay, president and CEO of the National Retail Federation adds that the tariffs could have wide-ranging repercussions. “The tariffs will create uncertainly for retailers and other businesses that are prepared to reinvest savings from the tax cut in capital investments, wage increases, workforce training and new jobs in communities across the country,” he says.
Meanwhile, policy makers across the world are warning of a brewing trade war that could undermine the broadest global recovery in years.
Fed warnings
Even central banks, which normally stay above the fray of trade spats, are weighing in. “A number of participants reported about their conversations with business leaders around the country and reported that trade policy has become a concern,” Federal Reserve Chairman Jerome Powell said this week, while cautioning that trade issues haven’t changed the Fed’s outlook. The Bank of England warned Thursday that increased protectionism could have a “significant negative impact” on global growth.
The Trump administration is framing the move as a major turning point in U.S.-China relations. It followed a seven-month investigation by USTR into allegations China violates U.S. intellectual property, under the seldom-used section 301 of the 1974 Trade Act. The U.S. concluded China engages in a range of violations, including policies that force American companies to transfer technology and the accessing of trade secrets through hacking, said Eissenstat.
Trump’s actions represent a “seismic shift from an era dating back to Nixon and Kissinger, where we had as a government viewed China in terms of economic engagement,” White House trade adviser Peter Navarro told reporters on Thursday. “That process has failed.”
“The problem is that with the Chinese in this case, talk is not cheap. It has been very expensive for America,” said Navarro. “Finally the president decided that we needed to move forward.”
Before the tariffs become final, there will be a 30-day comment period, the White House said. Trump also is directing his officials to pursue a World Trade Organization complaint against China for discriminatory licensing practices.
It will be Trump’s first trade action directly aimed at China, which he has blamed for the hollowing out of the American manufacturing sector and the loss of U.S. jobs. The Trump administration also is increasingly signaling it will exclude allies such as the European Union and Brazil from tariffs on steel and aluminum that take effect Friday, suggesting the U.S. is more interested in raising pressure on China, the world’s biggest producer of both commodities.
China warning
China’s Ministry of Commerce has cautioned against the U.S. taking measures “detrimental to both sides.” The nation strongly opposes such unilateral and protectionist action, and will take “all necessary measures” to firmly defend its interests, the ministry said in a statement on its website.
“If Trump really signs the order, that is a declaration of trade war with China,” said Wei Jianguo, former vice commerce minister and now an executive deputy director of the China Center for International Economic Exchanges, a government-linked think tank.
“$50 billion in tariffs against China, if that is what the U.S. moves ahead with, is serious money. Even so, the impact on China’s GDP would still be just a fraction of a percent off the growth rate,” Tom Orlik, chief Asia economist for Bloomberg Economics, wrote in a note. “The greater risk comes to China’s long-term development trajectory, if the rise of economic nationalism impedes their march up the value chain.”
“China is not afraid, nor will it dodge a trade war,” Wei said. “We have plenty of measures to fight back, in areas of automobile imports, soybean, aircraft and chips. On the other hand, Trump should know that this is a very bad idea, and there will be no winner, and there will be no good outcome for both nations.”
Chinese Premier Li Keqiang said this week that the nation will further open its economy, including the manufacturing sector, and pledged to lower import tariffs and cut taxes. In opening manufacturing further, China won’t force foreign companies to transfer technology to domestic ones and will protect intellectual property, he said.
Bloomberg Economics estimates a global trade conflagration could wipe $470 billion off the world economy by 2020.
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