John Minchillo / AP
Higher prices will come to stores this fall, retailers warn if President Trump follows up on his threat to slash new tariffs on Chinese imports.
The White House pushed the tariff threat on Friday, even as Trump announced a new deal aimed at increasing beef exports to Europe. A day earlier, Trump threatened to impose a new 10% tariff on products imported from China at $ 300 billion.
Increasing trade tensions led to another sale on Wall Street Friday. The Dow Jones Industrial Average dropped nearly 100 points, or 0.4%, and recovered from steeper losses earlier in the day.
More than 40% of all clothing sold in the United States is made in China, as are almost 70% of shoes and 88% of toys.
These goods have been largely untouched by the tariffs the president has already imposed on China over the past year. But they will almost certainly be on the target list if additional duties are imposed on September 1.
"What really sets this list of products apart from all the previous tariffs is that it's basically consumer goods," said Chad Bown, a trade analyst at the Peterson Institute for International Economics. "There are clothes and toys, iPhones. Everything that's been screened so far, and that's what is likely on the list this time."
Negotiators say they support the president's goal to change China's unfair trade practices, but the arguments tariffs are the wrong way to do it.
"All this is just going to add up," said David French, senior vice president of the National Retail Federation. "At some point, whether it's this holiday season or sometime next year, the full pain comes home to roost."
Store owners can try to absorb the cost of customs with the first to keep customers happy. But in the end, French said, these import duties will show up in the prices people pay in the cash register.
The administration trivializes the warnings.
"Every consumer impact is very, very small – minus," financial adviser Larry Kudlow of the White House told reporters Friday. "Consumer spending and consumer wages all pay off. That'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 is still a low 3.7%, the Labor Department said on Friday that employment has shifted, with employers allowing around 140,000 jobs in each of the last three months – down from about 233,000 in recent months last year.
Imports of goods from China fell 12% during the first half, according to the Census Bureau. But exports to China fell 18%. Not only has China introduced reciprocal tariffs on US exports, but it has also reduced tariffs on competing products from other countries.
"That puts American exporters at a disadvantage," Bown said. "They are hurt twice – by prevailing tariffs, and now they have even more difficulty competing in the Chinese market with their European, Canadian, Japanese competitors."
Farmers and farmers have been particularly hard hit by the president's trade battle, as other countries have targeted farm property in an attempt to score political points here in the United States
Cattle holders got some relief Friday, with an agreement to allow more US beef is sold duty-free in Europe.
"This is a huge 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 wide-brimmed hats.
The agreement with Europe gives a thick steak to the black eye that US exporters have cared for over the past year. But Trump still seems more interested in erecting new trade barriers than breaking down old ones. When 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.