Effect of tariffs likely invisible
Trump’s delays were meant to save shoppers money on holiday gifts
WASHINGTON — The White House saw a clever way to save Christmas for strapped consumers.
Early this past summer, as President Donald Trump was considering a fresh round of tariffs on China, his trade advisers discussed exempting televisions from a list of products likely to be hit next, because of the effect the penalty could have on holiday sales.
Chinese companies manufacture many of the LED TVs that are purchased globally, and Trump was eager to claim credit for saving holiday shoppers big money.
In the end, Trump decided not to exempt TVs which were subject to new tariffs, a 10% levy, that took effect Sept. 1.
But Trump delayed tariffs on other popular electronic imports from China, hoping that would keep prices reasonable for the holiday season.
It turns out there was no Christmas to be saved. Prices were stabilizing anyway, and experts see no sudden price increases, even if the next round of planned tariffs go into effect on Dec. 15.
Trump said he has “no deadline for negotiations” and could put a China deal on hold until after next year’s presidential election. He has given no public indication of whether the December tariffs will go ahead as scheduled or be delayed.
Asked last week whether the tariffs will go into effect as planned, Trump said, “We’re not discussing that, but we are having very major discussions on Dec. 15. Something could happen, but we are not discussing that yet.”
Without a trade deal with China, tariffs could take a toll on consumers early next year.
Kevin Hassett, who was chairman of the White House Council of Economic Advisers when Trump first levied tariffs on Chinese-made goods, anticipates prices will rise in January and February, unless the president orders another freeze.
“To the extent that the tariffs do happen, then one would expect to see some kind of increase in prices early next year,” he said.
But not this month. Erik Lundh, a senior economist at The Conference Board, which tracks consumer confidence, had a similar view. “The notion that an additional round of tariffs will affect consumers in the run-up to Christmas is overstated.”
When Trump announced in August he was delaying tariffs on cellphones, smartwatches, video game consoles, laptops, computer monitors and other electronic items until Dec. 15, he said it was to help consumers.
“We’re doing this for Christmas season, just in case some of the tariffs would have an impact on U.S. customers, which, so far, they’ve had virtually none,” he told reporters on Aug. 13. “But just in case they might have an impact on people, what we’ve done is we’ve delayed it so that they won’t
be relevant for the Christmas shopping season.”
The president also encouraged American companies to move production to the United States for Chinese-made goods and told retailers to stock their shelves with products assembled outside of China.
“The more notice you give people, the smaller the disruption,” said Hassett, who left the White House at the end of June. “And so it’s just generally a good idea, if you are engaged in a dispute like this, that you give suppliers a chance to line up alternatives. And so that would generally be true, regardless of the holiday.”
Since the summer, tariffs have been imposed on some types of footwear and apparel. Fifty-three percent of footwear imports from China are now affected and all of them will be affected in the Dec. 15 round, according to data from the Peterson Institute for International Economics, a research firm.
“There are a lot of holiday gifts that were already on the tariff list, whether it was ones earlier this year or the ones that went into effect in September,” said Jon Gold, vice president of supply chain and customs policy at the National Retail Federation. “A lot of apparel and footwear were on that September list. And you know apparel and footwear are a big holiday item.”
Currently, 18% of toys imported from China have been affected by tariffs. On Dec. 15 all toys imported from China will be affected.
Toys from China account for 88% of the supply to U.S. retailers, according to The Trade Partnership, a nonpartisan economic consulting firm.
But the effect of all this is likely to be largely invisible, at least during the holiday season.
Tyler Goodspeed, who sits on the Council of Economic Advisers, said inflation data shows there has been very little price pressure so far.
The government’s Consumer Price Index shows inflation at historically low levels. Prices rose 1.8% over the year ending in October. At the same point in 2018, the index tracked inflation at 2.5 percent.
“When you look at consumer price inflation, it’s looking pretty subdued,” Goodspeed said. “So we’re not seeing a whole lot of price pressure in the data at this point.”
Consumers are traditionally the engine that fuels the economy and what motivates consumers is how they see their own economic situation.
The Conference Board, which conducts monthly surveys measuring confidence, has found little evidence that tariffs matter so far to consumer psychology.
“Wages are strong and consumers feel good about jobs,” said Lundh.
And prices show little evidence they’re going to be affected by tariffs during the holiday season.
“Retailers were able to do a lot of frontloading of imports,” said Laura Baughman, president of The Trade Partnership. “Christmas goods tended to arrive in July, August and September.”
A retailer could also spread the tariff’s impact around to minimize a price jolt on one product. Suppose a handbag was subject to a 25% tariff — the retailer could increase the price 10% and then raise the price of shoes not affected by 5%. The pain is spread, with the non-tariff item absorbing some of the impact.
If the new tariffs do go into effect this month, Gold said retailers will have to decide how to react.
“They’re taking on pretty much 100% of the cost, and they’re going to unfortunately have to pass that along at some point to the consumer,” he said.
“And I don’t think we’ll know the full impact until after the holiday season, where we see what happens with sales overall,” Gold said. “While the economy continues to be strong, there is still concern about what happens.”