Despite multiple indications last month of a possible breakthrough in trade negotiations, the United States and China went ahead with their latest tariff increases on each other’s goods Sunday, potentially raising prices Americans pay for some clothes, shoes, sporting goods and other consumer items in advance of the holiday shopping season.
The 15 percent U.S. taxes apply to about $112 billion of Chinese imports. All told, more than two-thirds of the consumer goods the United States imports from China now face higher taxes. The administration had largely avoided hitting consumer items in its earlier rounds of tariff hikes.
But with prices of many retail goods now likely to rise, the Trump administration’s move threatens the U.S. economy’s main driver: consumer spending. As businesses pull back on investment spending and exports slow in the face of weak global growth, American shoppers have been a key bright spot for the economy.
As a result of Trump’s higher tariffs, many U.S. companies have warned that they will be forced to pass on to their customers the higher prices they will pay on Chinese imports. Some businesses, though, may decide in the end to absorb the higher costs rather than raise prices for their customers.
Trump told reporters in August that Apple CEO Tim Cook privately made a “very compelling argument” that the administration’s tariffs on Chinese-assembled goods have made an unfair impact on the California-based tech giant, because its chief rival, Samsung, has conducted most of its manufacturing in South Korea and did not have to pay the levy.
Even more tariffs loom on the horizon. On Dec. 15, the Trump administration is scheduled to impose a second round of 15 percent tariffs — this time on roughly $160 billion of imports. If those duties take effect, virtually all goods imported from China will be covered, including all major Apple products.
In China, authorities began charging higher duties on American imports at midday Sunday, according to employees who answered the phone at customs offices in Beijing and the southern port of Guangzhou.
Tariffs of 10 percent and 5 percent apply to items ranging from frozen sweet corn and pork liver to marble and bicycle tires, the Chinese government announced earlier.
After Sunday’s tariff hike, 87 percent of textiles and clothing the United States buys from China and 52 percent of shoes will be subject to import taxes.
The Chinese government has released a list of American imports targeted for penalties on Dec. 15 if the U.S. tariff hikes take effect. In total, Beijing says Sunday’s penalties and the planned December increases will apply to $75 billion of American goods.
Washington and Beijing are locked in a war over U.S. complaints that China steals U.S. trade secrets and unfairly subsidizes its own companies in its drive to develop global competitors in such high-tech industries as artificial intelligence and electric cars.
To try to force Beijing to reform its trade practices, the Trump administration has imposed import taxes on billions of dollars’ worth of Chinese imports, and China has retaliated with tariffs on U.S. exports.
Trump has insisted that China itself pays the tariffs. But in fact, economic research has concluded that the costs of the duties fall on U.S. businesses and consumers. Trump had indirectly acknowledged the tariffs’ impact by delaying some of the duties until Dec. 15, after holiday goods are already on store shelves.
A study by J.P. Morgan found that Trump’s tariffs will cost the average U.S. household $1,000 a year. That study was done before Trump raised the Sept. 1 and Dec. 15 tariffs to 15 percent from 10 percent.
The president has also announced that existing 25 percent tariffs on a separate group of $250 billion of Chinese imports will increase to 30 percent on Oct. 1.
That cost could weaken an already slowing U.S. economy. Though consumer spending grew last quarter at its fastest pace in five years, the overall economy expanded at a modest 2 percent annual rate, down from a 3.1 percent rate in the first three months of the year.
The economy is widely expected to slow further in the months ahead as income growth slows, businesses delay expansions and higher prices from tariffs depress consumer spending. Companies have already reduced investment spending, and exports have dropped against a backdrop of slower global growth.
Americans have already turned more pessimistic. The University of Michigan’s consumer sentiment index, released Friday, fell by the most since December 2012.
“The data indicate that the erosion of consumer confidence due to tariff policies is now well underway,” said Richard Curtin, who oversees the index.
Some retailers may eat the cost of the tariffs. Target confirmed to The Associated Press that it warned suppliers that it won’t accept cost increases arising from the China tariffs. But many smaller retailers won’t have the bargaining power to make such demands and will pass the costs to customers.
Fox News’ Joseph Wulfsohn and The Associated Press contributed to this report.
Gregg Re is a lawyer and editor based in Los Angeles. Follow him on Twitter @gregg_re.
Author: Gregg Re