Trump Hikes China Tariffs Across the Board in Recession-Stoking Clap Back
Date: Monday, August 26, 2019
Source: Sourcing Journal
Another day, another tariff increase.
President Trump has increased tariffs on more than one tranche of goods from China, a move provoked by China’s promise Friday to tariff $75 billion worth of American goods if Trump pressed forward with his planned tariffs.
Reiterating China’s unbalanced trading relationship with the U.S., which he claims has been a burden for the U.S. taxpayer, the president tweeted late Friday, “…In the spirit of achieving Fair Trade, we must Balance this very unfair Trading Relationship. China should not have put new Tariffs on 75 BILLION DOLLARS of United States product (politically motivated!). Starting on October 1st, the 250 BILLION DOLLARS of goods and products from China, currently being taxed at 25%, will be taxed at 30%.”
The latest tranche four tariffs will see a new increase, too.
Continuing in a separate tweet, Trump said, “Additionally, the remaining 300 BILLION DOLLARS of goods and products from China, that was being taxed from September 1st at 10 percent, will now be taxed at 15%.”
Already, the administration’s actions on trade have given rise to rumblings of a recession, and created even greater angst among retailers wondering what will become of holiday sales. With Friday’s news, conditions are expected to worsen.
“The problem for Trump is he has already shown that his hand is weak,” said Thomas Prusa, a Rutgers University–economics professor and international trade expert. “There was a huge outcry from the retail sector when it looked like he was going to hit core holiday gifts. By delaying the tariffs on those products until December he quieted the anticipated consumer outcry and hopefully prevented a disastrous holiday season from occurring. Nothing says economic downturn like a weak holiday buying season!”
On the Hill, the president’s cohort are of the belief that consumers have money to spend—and are eager to do so.
“Consumers, first of all, they’re working; the employment numbers are terrific,” Trump’s chief economic advisor Larry Kudlow, said on Fox News Sunday. “Second of all, they’re working at much higher wages. Third of all, they’re spending. And fourth of all, interestingly, they are even saving while they’re spending. That’s about as good as it gets.”
Kudlow also insists the U.S. isn’t headed into a recession, though he took a similar position in 2007, just before the Great Recession hit.
Economic predictions aside, retail is still facing the very real fact that the holiday season is fast approaching—and so are the tariffs that will send those products’ prices higher.
“The first batch of products, in this latest wave of tariffs, involve a lot of clothing. Those tariffs go into effect in September. Those products will have higher prices by the holidays. (But how many kids go to bed on Christmas eve dreaming of new socks and underwear?),” Prusa said. “The second batch of products involved far more electronics. (This is what kids dream of… a new iPhone, a big screen TV, video game consoles, etc.) Given that Trump has sensibly delayed at least some of his tariffs, the big question for the holiday season is how confident is the American consumer?
Continuing, he said, “Trump is now in a corner—a gridlocked Congress, massive and growing budget deficit, and a Fed with little room to cut interest rates.”
Join us at Sourcing Summit New York for a panel on, “Is it Possible to Build a Tariff-Proof Sourcing Model?” You’ll hear from trade leaders, textile experts, trade lawyers and customs brokers on getting beyond panic to find rational solutions for threats to the bottom line. Visit our event page for more info and to buy tickets.