Listen Now

Get Ready For Higher Prices If New Tariffs Hit Goods From China, Retailers Warn

Aug 2, 2019
Originally published on August 2, 2019 6:54 pm

Higher prices will be coming to stores this fall, retailers warn, if President Trump follows through with his threat to slap new tariffs on Chinese imports.

The White House pressed the tariff threat on Friday, even as Trump announced a new agreement aimed at boosting beef exports to Europe. A day earlier, Trump threatened to set a new 10% tariff on $300 billion worth of products imported from China.

Rising trade tensions prompted another sell-off on Wall Street on Friday. The Dow Jones Industrial Average closed down nearly 100 points, or 0.4%, recovering from steeper losses earlier in the day.

More than 40% of all the clothes sold in the United States are made in China, as are nearly 70% of the shoes and 88% of the toys.

These items have been largely untouched by the tariffs the president has already imposed on China over the past year. But they'll almost certainly be on the target list if additional tariffs are imposed Sept. 1.

"What really does set this list of products apart from all of the earlier tariffs are it's basically consumer goods," said Chad Bown, a trade analyst at the Peterson Institute for International Economics. "It's clothing, and toys, iPhones. All of that stuff has been shielded so far, and that's what's likely on the list this time around."

Retailers say they support the president's goal of altering China's unfair trading practices, but they argue tariffs are the wrong way to go about it.

"All of this is just going to add up," said David French, senior vice president at the National Retail Federation. "At some point, whether it's this holiday season or some time next year, the full pain is going to come home to roost."

Store owners might try to absorb the cost of the tariffs at first, to keep customers happy. But ultimately, French said, those import taxes will show up in the prices people pay at the cash register.

The administration downplays those warnings.

"Any consumer impact is very, very small — minuscule," White House economic adviser Larry Kudlow told reporters Friday. "Consumer spending and consumer wages and salaries are all booming. It's the strongest part of the economy."

Consumer spending — which accounts for more than two-thirds of the economy — has been strong, but the trade war is taking a toll. While unemployment remains a low 3.7%, the Labor Department said Friday that hiring has downshifted, with employers adding about 140,000 jobs in each of the last three months — down from about 233,000 in final months of last year.

Imports of goods from China fell 12% in the first half of the year, according the Census Bureau. But exports to China fell 18%. China has not only imposed retaliatory tariffs on U.S. exports, but it has also relaxed tariffs on competing products from other countries.

"That puts American exporters at a disadvantage," Bown said. "They're getting hurt twice — by the retaliatory tariffs, and now they're having an even more difficult time competing in the Chinese market with their European, Canadian, Japanese competitors."

Farmers and ranchers have been particularly hard hit by the president's trade battles, as other countries have targeted farm goods in an effort to score political points here in the U.S.

Cattle ranchers got some relief on Friday, with an agreement to allow more American beef to be sold duty-free in Europe.

"This is a tremendous victory for American farmers, ranchers, and of course European consumers, because American beef is considered the best in the world," Trump said during a White House ceremony, surrounded by ranchers in broad-brimmed hats.

The deal with Europe applies a thick steak to the black eye that U.S. exporters have been nursing for the past year. But Trump still seems more interested in erecting new trade barriers than in knocking down old ones. As he left the signing ceremony, the president couldn't resist joking about imposing a new 25% tariff on imported Mercedes and BMWs.

At least, Trump said he was joking.

Copyright 2019 NPR. To see more, visit https://www.npr.org.

AUDIE CORNISH, HOST:

Higher prices will be coming to stores this fall if President Trump follows through with his threat to slap new tariffs on Chinese imports. That's according to retailers who warn the tariffs would apply to a broad swath of consumer items, from electronics to tennis shoes. Rising trade tensions with China prompted another sell-off on Wall Street today, where the Dow Jones Industrial Average fell nearly 100 points. NPR's Scott Horsley has more.

SCOTT HORSLEY, BYLINE: More than 40% of all the clothes sold in the United States are made in China. China also makes nearly 70% of all the shoes sold here and 88% of the toys. These items have been largely untouched by the tariffs President Trump has already imposed on China over the last year. But trade analyst Chad Bown of the Peterson Institute for International Economics says they'll almost certainly be on the target list if the president makes good on his threat to impose new tariffs September 1.

CHAD BOWN: What really does set this list of products apart from all of the earlier tariffs are, it's basically consumer goods - clothing and toys, iPhones - all of that stuff has been shielded so far, and that's what's likely on the list this time around.

HORSLEY: Senior Vice President David French with the National Retail Federation says, at first, some store owners might try to absorb the cost of the tariffs to keep customers happy. But ultimately, he says those import taxes will show up in the prices people pay at the cash register.

DAVID FRENCH: All of this is just going to add up. And at some point, whether it's this holiday season or sometime next year, the full pain is going to come home to roost.

HORSLEY: The administration downplays those warnings. White House economic adviser Larry Kudlow insists the trade war is costing China more than it is the U.S.

(SOUNDBITE OF ARCHIVED RECORDING)

LARRY KUDLOW: Any consumer impact is very, very small, minuscule. By the by, consumer spending and consumer wages and salaries are all booming.

HORSLEY: Consumer spending, which accounts for more than two-thirds of the economy has been strong, but the trade war is taking a toll. While unemployment is a low 3.7%, the Labor Department said today hiring has downshifted, with employers adding about 140,000 jobs in each of the last three months, down from about 233,000 in the final months of last year.

Imports from China fell 12% in the first half of the year, but exports to China fell even further - 18%. Bown says China has not only imposed retaliatory tariffs on U.S. exports, but it's relaxed tariffs on competing products from other countries.

BOWN: That puts American exporters at a disadvantage. They're getting hurt twice - by the retaliatory tariffs, and now they're having an even more difficult time competing in the Chinese market.

HORSLEY: Farmers and ranchers have been particularly hard hit by the president's trade battles, as other countries have targeted farm goods in an effort to score political points here in the U.S. Cattle ranchers did get some relief today, though - an agreement making it easier to export American beef to Europe. Trump announced the deal at the White House, surrounded by ranchers in broad-brimmed hats.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT DONALD TRUMP: This is a tremendous victory for American farmers, ranchers and, of course, European consumers because American beef is considered the best in the world.

HORSLEY: The deal with Europe applies a thick steak to the black eye U.S. exporters have been nursing for the last year, but Trump still seems more interested in erecting new trade barriers than knocking down old ones. As he left the signing ceremony, the president couldn't resist joking about imposing a new 25% tariff on imported Mercedes and BMWs - at least the president said he was joking.

Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.