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Analysts: Next China Tariffs Will Hit Consumers More Than Prior Rounds

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Analysts: Next China Tariffs Will Hit Consumers More Than Prior Rounds

Consumers will feel impacts from the next planned round of China tariffs more directly than previous rounds, according to trade analysts.

President Donald Trump on Thursday announced on Twitter that beginning September 1, a tariff of 10 percent will be placed on the remaining $300 billion of Chinese imports that had not previously been subject to tariffs.

Earlier tariff tranches were more focused on industrial goods, but the forthcoming $300 billion tranche includes goods like toys, sunglasses, sports equipment, clothes and shoes. Therefore, the impact on consumers will be much more direct and significant than the previous three tariff lists, Wendy Cutler, managing director of the Asia Society Policy Institute's Washington, D.C., office, told American Shipper/FreightWaves.

Derek Scissors, resident scholar for the American Enterprise Institute, said impacts will be more direct than previous tariff rounds, but likely won't be cataclysmic.

"A 10 percent tariff does not translate to a 10 percent increase in prices, and most consumers won't notice a rise if the tariff is applied," Scissors said in an email.

He said consumers would notice an increase to 25 percent, but on balance, doubts that will happen.

To help ensure against another tariff increase, the Chinese could make fairly small commodity purchases or Trump "could assess the Democratic field and decide he doesn't need to be more of a trade hawk," said Scissors, who has regular contact with the Trump administration.

During the Democrat Party primary debates this week, several candidates showed a lack of support for tariffs.

The forthcoming tariffs' impact on consumer prices will be more immediate as a result of the products they will cover, said Bryan Riley, director of the National Taxpayers Union Free Trade Initiative.

"Obviously, the tax cost will be lower if import volume falls or manufacturers shift production to other countries to avoid the tariffs," Riley said in an email. "There is so much trade-related uncertainty that it is hard to predict whether we will get a deal and tariffs will be reduced or we won't get a deal and tariffs will be increased, but the track record so far has clearly been toward higher tariffs."

The last tranche of tariffs rose from 10 percent to 25 percent, so higher tariffs eventually can be expected in this fourth tranche, said Cutler, a former negotiator in the Office of the U.S. Trade Representative.

Exporters from around the world, particularly those in China, will front-load as many shipments as possible to the U.S. before September 1, she said.

Charles Boustany, partner for Capitol Counsel, a Washington, D.C.-based lobbying firm, told American Shipper/FreightWaves there will be a "scramble" to import goods to the U.S., as seen in previous tariff tranches.

"It's a pretty short time frame," said Boustany, a former member of Congress from Louisiana. "It's barely a month [until the tariffs are scheduled to take effect], and … people will try to get what they can in under the deadline."

Boustany called for a reassessment of the Trump administration's China strategy, saying the Chinese likely won't succumb to unilateral pressure to change their businesses practices, and that unilateral pressure will only cause Chinese interests to become more entrenched in their own system for growth.

The Trump administration needs "to come up with some constructive ways to engage allies in this and to use additional multinational leverage to show that China is really the outlier in its way of conducting business and that it's in their interest to change," Boustany said.

Groups including the American Apparel & Footwear Association (AAFA), Retail Industry Leaders Association (RILA) and Footwear Distributors and Retailers of America (FDRA) criticized the tariff announcement.

"This decision will increase the tariff bill on all clothes, shoes and home textiles, like blankets and sheets – products that already account for the vast majority of the duties collected by the U.S. government," AAFA CEO Rick Helfenbein said in a statement. "The fact that this tweet comes after only one meeting with the Chinese delegation following the resumption of talks is extremely concerning. It is time for Congress to step up and take back its authority to manage international trade as outlined under the U.S. Constitution."

RILA Vice President for International Trade Hun Quach said American families shouldn't be a "pawn" in the U.S.-China trade war. The tariff "announcement only moves us closer to consumers bearing the brunt of the pain," she said in a statement.

FDRA CEO Matt Priest said in a statement, "Political considerations are outweighing economic common sense," noting that 70 percent of all the shoes sold in the U.S. come from China.

"We will not take this news lying down," he said. "This is one of the largest tax increases in American history and it is vitally important that we fight this action on behalf of our consumers and our industry."

The Office of the U.S. Trade Representative will soon publish a notice in the Federal Register with specific details on the forthcoming tariffs.

Published May 17, the proposed tariff list to cover $300 billion of goods from China may be found here.

Image Sourced by Pixabay

Posted-In: China FreightGovernment News Politics Global Markets General Best of Benzinga

 

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