The Trump government has made it a priority to go after China for engaging in intellectual property theft and technology transfers. Trump set taxes on $50 billion of goods before imposing the tariffs on $200 billion of products in September.
Luckily for this year’s shoppers, costs probably will not be going up yet. The tariff is paid by importers and Black Friday sales prices were set prior to tariffs kicking in.
A whopping 93 percent of Americans plan to buy gifts this holiday season, but 73% state tariffs on Chinese products will impact how they shop.
Next year might be quite different if President Trump and Chinese Dictator Xi Jinping don’t come to a trade agreement before the end of the year, when Trump says he will escalate the 10 percent tariffs to 25%.
As soon as you get to that 25% mark, that is when you are likely to see more price increases for the end customer. The United States Trade Representative’s Office released its latest update on Tuesday about its investigation and the tone remained harsh.
Items which were influenced by the tit-for-tat tariffs between the U.S. and China included things from smart bicycles and bicycle helmets to furniture and makeup. Prices for consumers will go up since U.S. tariffs on foreign products mean U.S. businesses that rely on imports must pay more for them, and those companies will, in turn, pass the extra cost to customers. US Trade Representative Robert Lighthizer ramped up the pressure on China by releasing an updated report showing Beijing has done little to repair its practices.
The U.S. has threatened to implement tariffs on another $267 billion worth of Chinese imports and to increase tariffs on goods which were already subject to earlier rounds. If that were to occur, the escalation will hit consumers according to a report this week published by Deutsche Bank.
While the effect of tariffs aren’t necessarily felt immediately, some items, such as home appliances, have gone up in price amid the U.S.-China spat.
Regardless of the suffering in certain industries, the effect of prior rounds of tariffs has been mostly restricted in the U.S., writes Deutsche Bank strategist Shreyas Gopal, as many imports could be simply diverted to other countries.
America’s neighbors, Mexico and Canada, stand to benefit the most particularly if Congress ratifies the Nafta deal in the coming months.
However, the story differs for the remaining products that have not been hit with tariffs yet. Those are consumer goods, according to the report, while previous tariffs were applied to capital and intermediate goods.
A whopping 93 percent of U.S. laptops and 80 percent of mobile imports came from China in 2017. This means that there’ll be little prospect for U.S. consumers to avoid the tariffs by switching to non-Chinese imports of the same products. In the immediate to short term, U.S. consumers may need to endure higher costs brought on by the tariffs.
American businesses and lawmakers on both sides of the aisle agree that the China trade issues must be addressed — but not everyone believes that tariffs would be the ideal way. Retailers and some manufacturers say the duties could result in job losses and higher costs.
Even in the longer term, it may be difficult to change those imports from China to other countries. One thing is nearly certain: assembly lines will not return to the United States. The affected China-based factories are more likely to move to other Asian countries, because of the higher labor costs in the U.S.
Trump has also suggested that he could proceed with with imposing another round of tariffs within an extra $267 billion in products if no agreement can be reached, effectively covering all Chinese exports to the USA.
Vietnam might be the primary beneficiary. The nation is similar to China because it’s a mature sector in electronics assembly. But that will not happen overnight, and it’ll be costly.
Up to now, a relatively small quantity of apparel products from China have been hit with tariffs, but a new tranche will be significant. The U.S. receives 80 percent of accessories, and 73 percent of footwear from China.
The decrease in Chinese exports to the U.S. will also have a ripple effect in other countries, mostly in Southeast Asia, which sell parts for China to assemble. Take smartphones, for instance. China exported about $45 billion worth of mobile phones to the U.S. this past year, but more than 80 percent of that came from components imported from other Asian countries.
Worries about the U.S. and China tariff war have led to heightened volatility in global markets, with investors adjusting their positions in anticipation of the projected downturn in economic growth and business earnings next year.
American companies could be discovering an ingenious way to skirt round the tariffs imposed by President Donald Trump against China. Some big multinational US corporations are funneling imports from China through other overseas subsidiaries, say in Canada, before eventually importing them to the USA. This scheme lets companies avoid tariffs when importing from China.
A US company importing electrical switches from China now must pay a new trade tax. A U.S. company importing something which uses Chinese electric switches from a Canadian subsidiary doesn’t have to pay the trade tax.
If US businesses move a stage of production to some country, other than China, the trade tax is avoided. The U.S. is, in fact, importing as many Chinese electric switches as it did. It’s just going through another country now. For big multinational corporations, moving sections of production to factories is a procedure that is simple.
Corporate earnings are expected to slow significantly next year.
This year, the Fed increasing interest rates in the U.S. was the catalyst for investors to move their money out of some emerging markets to U.S. dollar-denominated assets, which led to volatile movements in global markets. It seems a really bad idea that the U.S. is increasing interest rates and engaging trade wars at the same time. Both actions promise to push consumer prices higher at a time when wage growth has been flat for many years. Who thinks that combination is going to end well?