NEW YORK • The Trump administration’s promise to keep consumer products out of the trade war — so shoppers wouldn’t take a hit — may be falling by the wayside.
The US Trade Representative released a new round of proposed tariffs on Chinese goods, listing 200 pages of items with a value of US$200 billion (RM800 billion). They target baseball gloves, handbags and digital cameras, among other goods. The move is in response to what the Trump administration says is China’s unfair trade practices, and comes after both nations already announced tariffs on US$34 billion of each other’s products.
President Donald Trump’s declaration that “trade wars are easy to win” will now be put to the test — China responded yesterday saying it would be forced to retaliate. Regardless of the outcome, US shoppers are poised to be losers, despite assurances from the administration that the new tariffs take into account the potential impact on consumers.
“The president has broken his promise to bring ‘maximum pain on China, minimum pain on consumers’, and American families are the ones being punished,” said Hun Quach, VP of international trade for the Retail Industry Leaders Association. “Consumers, businesses and the American jobs dependent on trade are left in the crosshairs of an escalating global trade war.”
The new list of products subject to duties has been expanded to target categories such as sporting goods, mattresses, some apparel items and furniture. The wider net will capture more products from Chinese factories with deep links to the global supply chain. Li & Fung Ltd, the world’s largest supplier of consumer goods, sources products for retailers including Walmart Inc and Macy’s Inc.
A representative for Li & Fung couldn’t immediately comment on the impact to the company.
In Hong Kong and China, where many suppliers to US retailing giants are based, shares of companies in affected sectors fell. Li & Fung fell as much as 3.9%, more than the 2.3% drop in the benchmark Hang Seng Index. Air conditioner and refrigerator manufacturer Qingdao Haier Co lost as much as 4.1%.
On the ground in China, companies are bracing for the pain. Guangzhou Hongye Import & Export Co sends human hair and wigs to the US, accounting for about half of its business. Owner Yang Huasong said customers will now likely switch to sourcing from Myanmar, India or other South-East Asian countries.
“A 10% tariff might not be a lot, but what customers will feel is that it’s too unstable to keep sourcing from us,” he said. “So business will keep getting worse and worse.”
The latest tariffs will force other companies to continue shifting away from the US. A sales representative at seafood exporter Taizhou Tianhe Aquatic Products Co said the company has been shipping lobsters to the US, but is increasingly diversifying to Europe, Australia and New Zealand. In addition, the company is targeting local customers.
“We discovered there is growing demand in the home market and better profitability than selling to the US,” she said.
Some major consumer segments managed to avoid the list, including footwear, toys, mobile phones and other household electronics. However, many companies in those categories aren’t feeling immune from the dispute, and are expecting an indirect impact.
“This is the next shot in the trade war with China that we started,” said Matt Priest, president of the Footwear Distributors & Retailers of America. “We’re all caught in the middle.”
To argue their case against tariffs, US consumer companies’ playbook has included pointing to higher costs for everyday goods, while laying the blame at the president’s feet — the American Apparel and Footwear Association has dubbed the tariffs the “Trump tax”. Industry groups have also highlighted the duties’ potential to derail US economic growth.
The new duties are “a reckless strategy that will boomerang back to harm US families and workers”, said David French, the National Retail Federation’s senior VP for government relations. “Tariffs on such a broad scope of products make it inconceivable that American consumers will dodge this tax increase as prices of everyday products will be forced to rise.”
The tariffs could take effect after public consultations end on Aug 30, according to a statement from the US Trade Representative’s office on Tuesday.
The downside to the economy is stark, said UBS Securities economist Robert Martin.
“We expect this will have a meaningful impact on US consumer inflation, as well as a meaningful drag on US gross domestic product growth,” he said, citing the Chinese government’s pledge to retaliate against new US duties. “China is by far the largest provider of consumer products to the US.” — Bloomberg