(Staff and Bloomberg)—While President Donald Trump searches for more China-made goods to tax, retailers are responding forcefully with the message that his hunt could put the squeeze on the American consumer’s wallet.
The U.S. president has threatened tariffs on an additional $200 billion in Chinese imports, but he may find it difficult to spare electronic goods, clothing and textiles that account for half of all Chinese exports to the U.S. Last week, Trump’s $50 billion hit list of made-in-China goods largely focused on high-technology industries such as robotics, aerospace and cars.
“They will focus on electronics,” says Fielding Chen at Bloomberg Economics. “Compared to shoes, it’s higher end. They focus on how much technology is inside, that’s the main principle. If it’s high technology, they will charge it.”
This time round, U.S. companies such as Walmart Inc., No. 3 in the Internet Retailer 2018 Top 1000, and Nike Inc., No. 27, and Chinese firms with American aspirations such as television maker Hisense Electric Co., No. 351 in the Internet Retailer 2018 Asia 500, may be snared as the net is cast wider. That’s because some of the Chinese manufacturers that Trump is targeting are also suppliers to American brands.
The U.S. won’t be able to reach the $250 billion number without putting tariffs on a “lot of” consumer goods imports, be that computers, cellphones or apparel, Brad Setser, a senior fellow for international economics at the Council on Foreign Relations, said on Twitter Tuesday. The U.S. consumers “will see/feel” the $200 billion, Setser wrote.
The situation led Hun Quach, vice president of international trade at the Retail Industry Leaders Association (RILA) to issue a one-sentence statement: “This is a global trade war, plain and simple, and the American families will be the ones who suffer most.”
Meanwhile, the National Retail Federation pointed to a study conducted earlier this year for NRF and the Consumer Technology Association that found that tariffs on $50 billion of Chinese imports would reduce U.S. gross domestic product by nearly $3 billion and lead to the loss of 134,000 American jobs. That equates to roughly four jobs lost for every job gained. Imposing tariffs on an additional $100 billion of Chinese imports would bring the total impact to a $49 billion reduction in GDP and the loss of 455,000 jobs.
“This is just what we predicted—a tit-for-tat trade war has erupted and American families are caught in the middle,” says Matthew Shay, NRF’s president and CEO. “Higher prices for everyday essentials and lost jobs threaten to sap the energy out of the strong U.S. economy just as most Americans are starting to enjoy the benefits of historic tax reform. This reckless escalation is the latest reminder that Congress must step in and exert its authority on trade policy.”
On Monday, Trump said he had instructed the U.S. Trade Representative’s office to identify $200 billion in Chinese imports for additional tariffs of 10%. He said the U.S. would impose tariffs on another $200 billion after that if Beijing retaliates. The range of products that could eventually be taxed by Trump is approaching the value of all U.S. imports from China last year, which is about $505 billion.
In response to Trump’s threats, China vowed to retaliate against U.S. companies.
Many Chinese manufacturers are part of the global supply chain. Li & Fung, which sources clothes and toys for retailers, counts Walmart and Macy’s Inc. as customers, while Yue Yuen supplies Nike Inc. and Under Armour Inc.
Still, Trump may be willing to make exceptions. His administration has told Apple Inc. CEO Tim Cook that iPhones assembled in China won’t be hit by the proposed tariffs, the New York Times reported, citing a person familiar with the matter.
Consumer electronics companies with large businesses or looking to make headway in the U.S., from Lenovo Group Ltd. to Hisense, may also face headwinds. Apart from Apple, many major American hardware makers also rely heavily on manufacturing in China, which became the world’s factory floor via a combination of government incentives and cheap labor.
“The Trump administration is calculating that it will win this high stakes game of poker,” said Rajiv Biswas, Asia Pacific chief economist at IHS Markit in Singapore. “The collateral damage from an escalating U.S.-China trade war will be widespread, hitting many Asian countries that are part of China’s manufacturing supply chain in sectors such as electrical and electronic products.”