The White House on Friday imposed $50 billion of tariffs on Chinese goods—a move, it says, will protect American workers and businesses from unfair trade practices. But the country’s largest retail trade association and some analysts are not buying that argument.
“Tariffs are taxes on American consumers, plain and simple,” Matthew Shay, CEO of the National Retail Federation (NRF) said in a statement. “These tariffs won’t reduce or eliminate China’s abusive trade practices, but they will strain the budgets of working families by raising consumer prices.”
Today’s White House statement calls the tariffs “essential to preventing further unfair transfers of American technology and intellectual property to China, which will protect American jobs.” That echoes the sentiments of a White House statement on May 29, which cited a United States Trade Representative’s investigation that found China’s technology policies put 44 million American technology jobs at risk.
However, the NRF statement says a study it commissioned with the Consumer Technology Association (CTA), a group that represents companies in the consumer technology industry, found that the tariffs, coupled with the impact of retaliation, would lead to four job losses for every job gained and reduce U.S. gross domestic product by nearly $3 billion.
In May, representatives of the NRF testified before the Office of the U.S. Trade Representative during a hearing last month to share the retail industry’s concerns over tariffs. And in an NRF television ad, economist and actor Ben Stein reprised his role in “Ferris Bueller’s Day Off” to explain why tariffs are bad economics.
A statement from Michael Petricone, senior vice president of government and regulatory affairs for the CTA, said the tariffs will be bad for jobs and the economy. “Tariffs go against the interest of the American people. The economy will respond to the president’s tariff agenda by increasing the cost of goods that people use every day, harming the U.S. economy and sinking the stock market. Imposing tariffs on Chinese goods could cost Americans hundreds of thousands of jobs,” the statement said.
In April, the U.S. revealed an initial list targeting about 1,300 products worth $50 billion in Chinese imports. The United States is also nearing completion of a second list of products ordered by Trump, worth $100 billion, which would be subject to the same public hearing process as the first, Reuters reported on Friday. That could bring another wave of duties after 60 days or more, the report said.
Today’s White House statement says: “The United States will pursue additional tariffs if China engages in retaliatory measures, such as imposing new tariffs on United States goods, services, or agricultural products; raising non-tariff barriers; or taking punitive actions against American exporters or American companies operating in China.”
“Implementation of the tariffs, when it occurs, could take us closer to a trade war,” Shane Oliver, head of investment strategy at AMP Capital Investors Ltd. in Sydney said prior to the White House announcement. “I suspect Trump also sees these announcements as a way of pressuring China into action on trade—so more classic Art of the Deal stuff.”
The response from China signaled a rapid escalation of the dispute. China will impose tariffs with “equal scale, equal intensity” on imports from the U.S. and all of the country’s earlier trade commitments are now off the table, the Commerce Ministry said in a statement on its website late Friday.
The trade tensions are escalating at an inopportune time for China’s economy. A trio of downbeat readings on Thursday and a slump in new credit growth reported earlier in the week suggest the world’s second-largest economy is already losing some momentum. Meanwhile, the U.S. economy is sprinting ahead, spurred by solid consumer spending—including May retail sales that topped forecasts on Thursday; U.S. retailers’ nonstore sales reached $55.829 billion in May on a seasonally adjusted basis, a 9.1% increase compared to the same month of 2017.
China has pledged a tit-for-tat response. In April, it said it would levy 25% tariffs on imports of 106 U.S. products including soybeans, automobiles, chemicals and aircraft, in response to proposed American duties.
Even as the atmosphere worsened, China still appears to be making concessions. A review of U.S. chipmaker Qualcomm Inc.’s $43 billion acquisition of NXP Semiconductors NV has been approved by Chinese regulators, according to people familiar with the matter who asked not to be identified. That deal, needing Chinese approval, had become a bargaining chip in the trade negotiations.
China and other nations should join together to counter Trump’s aggressive trade policies, the state-run China Daily said Friday, repeating past threats to retaliate in kind. While China hopes that talks can succeed in resolving the dispute, “it is high time that China and other major economies joined hands to better cope with the challenges created by the U.S.’s aggressive pursuit of trade advantages,” the editorial said.
“It’ll be a prolonged battle, not that simple that it can be solved through a few rounds of talks,” said Hu Yifan, regional chief investment officer and China chief economist at UBS Global Wealth Management.
Bloomberg News contributed to this report