Trump's New Tariffs Could Hit U.S. Shoppers Where It Hurts

Date: Tuesday, June 19, 2018
Source: Bloomberg

President Donald Trump is searching for more China-made goods to tax. His hunt could put the squeeze on the American consumer’s wallet.

As the U.S. president threatens tariffs on an additional $200 billion in Chinese imports, he may find it difficult to spare electronic goods, clothing and textiles that account for half of all Chinese exports to the U.S. Last week, Trump’s $50 billion hit list of made-in-China goods largely focused on high-technology industries such as robotics, aerospace and cars.

 "They will focus on electronics,” said Fielding Chen at Bloomberg Economics. "Compared to shoes, it’s higher end. They focus on how much technology is inside, that’s the main principle. If it’s high technology, they will charge it.”
Made in China

Electronic goods and textiles are among the biggest products U.S. imports from China

This time round, U.S. companies from HP Inc. to Nike Inc. and Walmart Inc., and Chinese firms with American aspirations such as television maker Hisense Electric Co., may be snared as the net is cast wider. That’s because some of the Chinese manufacturers that Trump is targeting are also suppliers to American brands.


The U.S. won’t be able to reach the $250 billion number without putting tariffs on a “lot of” consumer goods imports, be that computers, cellphones or apparel, Brad Setser, a senior fellow for international economics at the Council on Foreign Relations, said on Twitter Tuesday. The U.S. consumers “will see/feel” the $200 billion, Setser wrote.

“The eventual losers will be the U.S. consumers,” said Song Seng Wun, an economist at CIMB Private Banking in Singapore. “The Trump administration thinks that the Chinese will surrender first.”

On Monday, Trump said he had instructed the U.S. Trade Representative’s office to identify $200 billion in Chinese imports for additional tariffs of 10 percent. He said the U.S. would impose tariffs on another $200 billion after that if Beijing retaliates. The range of products that could eventually be taxed by Trump is approaching the value of all U.S. imports from China last year -- about $505 billion.

In response to Trump’s threats, China vowed to retaliate against U.S. companies.

Many Chinese manufacturers are part of the global supply chain. Li & Fung, which sources clothes and toys for retailers, counts Walmart and Macy’s Inc. as customers, while Yue Yuen supplies Nike Inc. and Under Armour Inc.

Still, Trump may be willing to make exceptions. His administration has told Apple Inc. Chief Executive Officer Tim Cook that iPhones assembled in China won’t be hit by the proposed tariffs, the New York Times reported, citing a person familiar with the matter.

Consumer electronics companies with large businesses or looking to make headway in the U.S., from Lenovo Group Ltd. to Hisense, may also face headwinds. Apart from Apple, many major American hardware makers also rely heavily on manufacturing in China, which became the world’s factory floor via a combination of government incentives and cheap labor.

“The Trump administration is calculating that it will win this high stakes game of poker," said Rajiv Biswas, Asia Pacific chief economist at IHS Markit in Singapore. “The collateral damage from an escalating U.S.-China trade war will be widespread, hitting many Asian countries that are part of China’s manufacturing supply chain in sectors such as electrical and electronic products.”

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