- President Donald Trump on Friday imposed a 25% tariff on $US34 billion worth of Chinese exports to the US.
- The tariffs apply mostly to machinery and industrial goods.
- But industry groups warn that American consumers will still pay the price because US manufacturers will pass on increased costs to customers.
President Donald Trump argues that new tariffs on $US34 billion worth of Chinese goods are designed to protect US businesses and force China to change its economic policy. But many industry groups say American consumers are likely to bear the brunt of the trade fight.
While less than 1% of the goods subject to the tariffs are consumer goods, the list of products targeted includes machinery that does everything from cutting metal to measuring electrical currents to incubating chickens. US businesses rely on these products to make their goods, which are eventually sold to US consumers.
More expensive equipment and parts means US businesses will see costs rise. In turn, they can pass on the increased costs to consumers or shrink costs in other areas – for instance, by laying off workers. Most experts say businesses are likely to use some combination of these two options.
So while the 25% tariffs, imposed Friday, may not result in an immediate price hike at the checkout line, many industry groups warn that Americans will still see changes:
- National Retail Federation: “With tariffs against China taking effect, American consumers are one step closer to feeling the full effects of a trade war,” Matthew Shay, the federation’s president and CEO, said in a statement Thursday. “These tariffs will do nothing to protect US jobs, but they will undermine the benefits of tax reform and drive up prices for a wide range of products as diverse as tool sets, batteries, remote controls, flash drives and thermostats.”
- Consumer Technology Association: “While President Trump says his trade policy is meant to punish China, the numbers show that, in reality, US businesses, workers and consumers will pay the price under this policy,” said Sage Chandler, the group’s vice president for international trade. “Of the original $US50 billion in tariffs on China, items including lithium batteries, navigation devices, disk drives and circuit board components will be affected – hitting $US15.2 billion worth of Chinese imports.”
- North American Food Equipment Manufacturers:The tariffs could even trickle down to the cost of fast food, Charlie Souhrada, a vice president of the group, told The Associated Press. While Trump’s duties do not apply to food products, Souhrada said the NAFEM member Henny Penny expected the tariffs to increase the price of its pressure cookers, which are in turn used by chains like Chick-fil-A to make food.
- National Association for Manufacturers:“Tariffs will bring retaliation and possibly more tariffs,” said Jay Timmons, the association’s president and CEO. “No one wins in a trade war, and it is America’s manufacturing workers and working families who will bear the brunt of continued tariffs. Manufacturers in the United States succeed when the rules are clear and fair and markets are open.”
While Friday’s tariffs are likely to hit US consumers eventually, Trump’s threat to impose tariffs on another $US200 billion worth of Chinese exports to the US could result in more direct pain for them.
Not just consumers facing pain
US consumers may eventually see higher prices on shelves, but there’s a second negative trickle-down effect. Many businesses count China as a major export destination, and the retaliatory tariffs imposed by the Chinese government on US products could similarly increase prices in China and hurt sales.
For instance, China’s 25% retaliatory duty on whiskey could harm US producers, according to the Distilled Spirits Council.
“Imposing 25 per cent tariffs on US whiskeys could put the brakes on an American export success story,” Christine LoCascio, a senior vice president for international trade at the council, said in a statement. “American spirits exports to China have grown by almost 1,200 per cent, from $US959,000 in 2001 to $US12.8 million in 2017.”
Distillers are worried that retaliatory tariffs – not only from China, but from Europe and Canada as well – could stunt their sales and slow expansion and hiring plans.
Business Insider Emails & Alerts
Site highlights each day to your inbox.