U. S. consumers could pay big price for China tariffs
Possible trade war also puts farmers in danger
President Trump’s move to impose hefty tariffs on Chinese imports and retaliation threats from China set off fresh worries Friday about higher prices for American consumers and steep sales losses for U. S. businesses.
Trump said this week that he’ll slap 25% tariffs on $ 50 billion to $ 60 billion in Chinese exports to the U. S., including aerospace, information and communication technology, and machinery.
The move is aimed at countering Chinese cyber and intellectual property theft of U. S. technology. It also tries to push back against China’s demands for tech transfers from U.S. companies in return for access to China’s market.
The Chinese government, in turn, said it would hit U. S. shipments to China with $ 3 billion in tariffs, affecting goods such as pork, aluminum pipes, steel and wine.
However, those duties appear to be in response to the 25% sweeping tariff on imported steel and 10% on aluminum that Trump announced this month, said Gary Hufbauer, senior fellow at the Peterson Institute for International Economics. He expects China to impose additional, more damaging tariffs on U. S. goods comparable to the $ 60 billion Trump announced this week.
Still, “if this is all there is, it’s a modest impact” on the U. S. economy, said Mark Zandi, chief economist of Moody’s Analytics.
❚ Economy: He estimates the conflict would trim economic growth by about a two- tenths of a percentage point this year and a tenth next year, including the effects from the steel and aluminum duties. The economy has been projected to grow2.5% to3% during that period. The bigger risk, he said, is that the current skirmishes mushroom into a global trade war.
U. S. officials have said the latest tariffs will be imposed in a way that minimizes the impact on consumers. They also could be lessened.
Trump said he’ll seek comment from business groups before finalizing the proposal.
But Hun Quach, vice president of international trade for the Retail Industry Leaders Association, said: “There’s no way to impose $ 50 billion in tariffs on Chinese imports without 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.”
And Matthew Shay, CEO of the National Retail Federation, said a trade war will erase the benefits of the recent tax cuts “and result in higher prices for a wide range of consumer products and basic household goods.”
❚ Tech: The tariffs could affect wildly popular imports such as smartphones and laptops. Hufbauer said retailers would likely absorb some of the cost increase, resulting in about a 15% price hike for shoppers.
Amazon, which buys in bulk and operates on thin margins, could pass along only a 1% or 2% higher price to consumers, said Daniel Ives, chief strategy officer and head of technology research at GBH Insights. Similarly, tariffs on imported parts such as semiconductors might raise the price of a laptop by only about 3%, Hufbauer said.
Retaliatory tariffs from China, meanwhile, could especially hurt American farmers. China is the world’s top soybean importer, with the U. S. providing close to 60% of the commodity. And the country is the second- largest buyer of U. S. pork.