Con­sumers could be col­lat­eral dam­age

The Denver Post - - FRONT PAGE - By Paul Wise­man and Joyce M. Rosen­berg

WASH­ING­TON» For many Amer­i­cans, Pres­i­dent Don­ald Trump’s trade war may soon get very real.

His ad­min­is­tra­tion is pre­par­ing to ex­tend 25 per­cent tar­iffs to prac­ti­cally all Chi­nese im­ports not al­ready hit with du­ties, in­clud­ing toys, sneak­ers, shirts, alarm clocks, toast­ers and cof­feemak­ers. That’s roughly $300 bil­lion worth of prod­ucts on top of the $250 bil­lion tar­geted ear­lier.

“The ad­min­is­tra­tion’s de­ci­sion to an­nounce a tax on ev­ery prod­uct com­ing from China puts Amer­ica’s en­tire econ­omy at risk,” the Re­tail In­dus­try Lead­ers As­so­ci­a­tion said in a state­ment. “Amer­i­cans’ en­tire shop­ping cart will get more ex­pen­sive.”

Trump’s tar­iffs are meant to put pres­sure on China in trade ne­go­ti­a­tions. The two coun­tries have held 11 rounds of talks over Amer­i­can al­le­ga­tions that China steals tech­nol­ogy, forces for­eign com­pa­nies to hand over trade se­crets and un­fairly sub­si­dizes its own com­pa­nies in a push to chal­lenge U.S. tech­no­log­i­cal dom­i­nance.

The Of­fice of the U.S. Trade Rep­re­sen­ta­tive on Mon­day pub­lished a list of 3,805 prod­ucts that could be hit for the first time with 25 per­cent tar­iffs. The list in­cludes things such as tuna,

paci­fiers, saw blades, flash­lights, door chimes, bil­liard balls and golf carts. It ex­cludes phar­ma­ceu­ti­cals and rare-earth min­er­als used in elec­tron­ics and batteries.

The agency will take pub­lic com­ments and hold a hear­ing on the pro­posed tar­iffs June 17.

In its ear­lier rounds of tar­iffs on Chi­nese prod­ucts, the Trump ad­min­is­tra­tion tried to limit the ef­fect on Amer­i­can con­sumers by fo­cus­ing on so-called in­ter­me­di­ate goods — im­ported com­po­nents that U.S. com­pa­nies use to make fin­ished prod­ucts.

That is about to change. Com­pa­nies are al­ready brac­ing for the fall­out.

E-Blox, an ed­u­ca­tional toy com­pany in Buf­falo Grove, Ill., im­ports toys from China and as­sem­bles and pack­ages them in the U.S.

“We are keep­ing a close eye on this next round,” said E-Blox chief op­er­at­ing of­fi­cer Joe Sey­mour. “That would be dev­as­tat­ing.”

If he tries to pass along the higher costs from the new tar­iff on toys to cus­tomers, Sey­mour said, he will lose sales.

And the com­pany’s profit mar­gins aren’t big enough for it to sim­ply ab­sorb the tar­iffs, he said.

Could E-Blox move man­u­fac­tur­ing back to the U.S. — as Trump has sug­gested — to dodge the taxes on im­ports?

Sey­mour said that would be hard be­cause the Trump ad­min­is­tra­tion has slapped im­port taxes on the Chi­nese plas­tic in­jec­tion mold­ing ma­chines he would need to pro­duce toys in this coun­try.

China, for its part, has punched back by im­pos­ing tar­iffs on $110 bil­lion in U.S. prod­ucts.

Trump on Tues­day shrugged off the tar­iff war.

“We’re hav­ing a lit­tle squab­ble with China,” he said at the White House.

Mary Lovely, an econ­o­mist at Syra­cuse Univer­sity, said it is un­clear whether the ex­panded tar­iffs will pres­sure Beijing to give in to U.S. de­mands.

Chi­nese lead­ers have been try­ing to shift their econ­omy away from the low-mar­gin con­sumer goods that make up a big share of the new $300 bil­lion hit list and to­ward more ex­pen­sive high-tech prod­ucts. They might not want to sac­ri­fice their tech­no­log­i­cal as­pi­ra­tions to save jobs in in­dus­tries that aren’t part of their plan, Lovely said.

Some U.S. im­porters might try to switch to sup­pli­ers out­side China, in coun­tries such as Viet­nam and In­done­sia. But the tran­si­tion won’t be easy. Costs could rise and qual­ity slip as new sup­pli­ers re­place ex­pe­ri­enced Chi­nese con­trac­tors.

“We’ve all worked for more than 20 years to get the man­u­fac­tur­ing safety stan­dards to the high­est lev­els ever from ven­dors from China,” said Jay Fore­man, CEO of Ba­sic Fun!, a toy com­pany in Boca Ra­ton, Fla., that im­ports from China. He said the com­pany can­not sim­ply switch to sup­pli­ers in In­dia or In­done­sia and can’t move man­u­fac­tur­ing to the U.S. ei­ther.

“For cry­ing out loud, un­em­ploy­ment is 3.6 per­cent. Who is go­ing to want to paint the eye­balls onto a Marvel ac­tion fig­ure or Bar­bie doll here?” he said. “It’s just not go­ing to hap­pen.”

Some busi­nesses are still reel­ing from the ear­lier tar­iffs.

At the Lug­gage Shop of Lub­bock in Texas, busi­ness is down 6 per­cent from the same pe­riod last year.

“Peo­ple are still trav­el­ing and buy­ing, but they’re just not buy­ing as much of the up­per mid­price points and higher price points, which is our bread and but­ter,” shop owner Tif­fany Zar­fas Wil­liams said.

She had to drop plans to hire an ex­tra per­son for the hol­i­days.

As the trade war goes on, she said, “I don’t know whether we’d be able to add any ad­di­tional peo­ple.”

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