Here’s what to expect from this round of tariffs
A broad swath of products, including Apple’s iPhones and school supplies, are about to get more expensive
President Donald Trump announced another wave of China tariffs this week, essentially saying he would impose a tax on nearly all $540 billion in Chinese goods that come into the United States in a year. And this batch could really bite.
The administration carefully tailored previous rounds of tariffs to pinch businesses in ways that most Americans might not notice. But the 10% levy on $300 billion of imports that Trump announced Thursday, which would take effect Sept. 1, is expected to hit consumers where it hurts. From Apple’s iPhones to school supplies, a broad swath of everyday products are about to get more expensive.
The latest move is likely to prompt companies to submit exclusion requests to be spared from the tariffs, cause the Federal Reserve to rethink its plans for interest rates and inspire fresh retaliation from China that could compound Americans’ economic pain.
Here’s what to expect:
Scramble for exclusions
Until Sept. 1, the focus will be on the Office of the U.S. Trade Representative for a final list of the Chinese products subject to the new tariffs.
The items will come from a 76-page list published in the Federal Register in May after Trump said that he wanted to have more potential tariffs in his quiver if the trade dispute dragged on.
Not every item on the May list will necessarily face tariffs. The trade representative’s office held a week of hearings about the proposed duties and has received comments from businesses around the country hoping for exemptions.
If the tariffs do take effect Sept. 1, companies will have an opportunity to apply for exemptions. In previous instances, those seeking waivers had to explain why the tariffs would cause them “severe economic harm,” whether the product at issue or a comparable one was unavailable outside China and whether the item was “strategically important” to China’s industrial policy.
Slump at retailers’ registers
Earlier rounds of tariffs mostly focused on industrial goods, but the 10%
levy announced Thursday is directed squarely at consumer items like clothes, toys and footwear.
That is bad news for, among others, shoemakers and the stores that sell their products, said Matt Priest, chief executive of the Footwear Distributors and Retailers of America. Less than 1% of shoes are made domestically, and China is the source of 70% of the goods imported into the United States.
“We’re very concerned this will be a long-term cost baked into what consumers will pay,” Priest said, adding that he was not expecting exclusions to be made for footwear.
“Nearly every type of shoe is made in China, so there will be impact across the board,” he said. The only exceptions are some high-end leather shoes that are made in Europe.
With some consumer products, the supply comes almost entirely from China, said David French, senior vice president of government relations at the National Retail Federation. He cited umbrellas, electric blankets and toys.
“Trump is feeling very muscular right now,” French said. “But the next round of tariffs will hit the president’s base particularly hard.”
The people who voted for him in 2016 felt economically vulnerable. The tariffs will cause job losses and higher prices for everybody but especially his base.”
A bite out of Apple
The most prominent U.S. company bracing for the tariffs is Apple, which typically unveils new products every September.
In a letter in June, Apple urged Robert Lighthizer, Trump’s top trade adviser, not to proceed with any new tariffs. The company warned that such tariffs would hamper its global competitiveness and reduce its contribution to the U.S. economy.
Thus far, Trump has shown little sympathy for Apple. Last month, after the company filed 15 tariff-exclusion requests, he said that they would be denied and that the company should make its products in the United States.
Should the new tariffs take effect on Sept. 1, they will hit Apple’s phones, watches, MacBooks, iMacs, iPads, AppleTV, keyboards and batteries. The company’s shares fell more than 2% Thursday after Trump said the new tariffs were coming.
Will China hit back?
Throughout the trade conflict, Beijing has demonstrated a willingness to respond to the Trump administration’s tariffs as proportionately as possible.
On Friday, China’s foreign minister, Wang Yi, said that “adding tariffs is definitely not the correct way to resolve economic and trade frictions.” U.S. officials were waiting to see how China planned to retaliate.
Throughout the yearlong dispute, China and the United States have continued to talk through their disagreements. China’s next move may be to give the silent treatment a try.
Will the Fed cut Trump more slack?
The Fed was already laser-focused on the trade war before Trump’s latest tariff announcement. Officials lowered interest rates this week for the first time in more than a decade, partly because of the uncertainty stoked by the tariffs and the risk that they pose to the economic outlook.
Fed officials do not believe that the tariffs already in place have by themselves hurt growth significantly. But policymakers worry that the extended fight is causing businesses to hold back on investment, which could ultimately hurt the broader economy.