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American shoppers to feel effects of Trump’s tariff grenade
[HONG KONG] The trade war's back on, and American shoppers are in the firing line like never before.
Days before what was potentially the final round of talks with China on a trade deal, US President Donald Trump channeled "Tariff Man" once again, threatening to more than double import levies on US$200 billion of Made-in-China goods. Accusing the Chinese side of hampering progress with attempts to re-negotiate, Trump took to Twitter, saying he plans to hike tariffs from the current 10 per cent to 25 per cent on Friday.
Trump also went beyond previous threats, saying he'd slap 25 per cent tariffs on a further US$325 billion of imports from China, a move that would effectively tax everything the world's largest factory sends to the US Those taxes would bring some of America's most-popular consumer goods into the fight -- from Apple Inc.'s iPhones to Nike sneakers.
"Trump has taken the proverbial sledgehammer to the walnut,'' Jeffrey Halley, senior market analyst with Oanda Asia Pacific, said in a note.
If Trump makes good on his latest threat, here's where US shoppers might feel the most pain:
Nike, Under Armour
From marathoners to weekend active-wear fans, sneaker buyers across America will have to pay more for running, tennis or soccer shoes, some of the US$11.4 billion of footwear the US imported from China last year. The American Apparel & Footwear Association said consumers are already facing higher prices after almost a year of trade tensions. "Now the crisis will only get worse,'' it said in a statement.
The association estimates that a family of four will pay at least US$500 more a year on apparel and footwear if the threatened tariffs are levied.
Despite a shift towards lower-cost manufacturing bases like Vietnam, China is still the single biggest source of apparel globally. A 2018 survey by the US Fashion Industry Association said that companies still source 11 to 30 per cent of their apparel from Chinese factories. While this is down from 30 to 50 per cent the year before, China is still the most important source of clothing.
Nike has almost a fifth of its factories located in China, accounting for 13 per cent -- 144,000 people -- of its supplier workforce. For footwear alone, a quarter of its factories are located in China.
Sporting enthusiasts, from cyclists to golfers, will find their gear dearer too. Pretty much every part of a bicycle, from saddles and spokes to tubes and frames, would be slapped with a 25 per cent tariff. The same goes for China-made golf bags, baseball mitts and batting gloves. If you're on the water, Trump's taxes would sink Made-in-China inflatable boats and canoes. The US imported US$27 billion of toys and sports equipment from China in 2018, government data show.
On Twitter, Trump said tariffs on the US$325 billion of additional Chinese imports will come into force "shortly." That'll mean higher prices for a range of Apple devices from smartphones to watches and headphones. "All tariffs ultimately show up as a tax on US consumers," Cupertino, California-based Apple told the Office of US Trade Representative in a letter in September. The US imported US$71.8 billion of cellphones and other household goods from China last year.
In December, Bloomberg reported that Apple's suppliers can keep production in China if tariffs were at a 10 per cent level, but could consider shifting them out of the country if levies reach 25 per cent -- the level Trump is now threatening.
Trump's tariffs would hit household staples in almost every aisle of the local Walmart. Think leather goods and handbags, soaps and shampoos, and plates and cups. Kitting out a new home? Prepare to pay more for China-made fridges and freezers, and knives and forks. In a September letter to US Trade Representative Robert Lighthizer, Walmart said a 25 per cent tariff be a "serious burden" on lower-income families. "Either consumers will pay more, suppliers will receive less, retail margins will be lower, or consumers will buy fewer products or forgo purchases altogether," the retailer said.
There'd be no escape for Chinese-made hedge shears, chainsaw blades and lawnmower parts at the home improvements chain. The cost of hammers, screwdrivers and woodworking equipment from China would likely climb, too. Lowe's said in February, as it announced fourth-quarter earnings, that tariffs were already eating into the company's profit margins.
The price of Chinese-made lipsticks and makeup, suitcases and vacuum cleaners would all likely rise if Trump gets his way. In a Sept. 6 letter to Lighthizer, retailer Target said it was concerned proposed duties would further hurt consumers and urged Trump's administration to reconsider. That's a sentiment echoed by the National Retail Federation after Trump's latest pledge. "If the administration follows through on this threat, American consumers will face higher prices and US jobs will be lost,'' the federation's senior vice president, David French, said in a statement.
Some discount retailers may be cornered by yet more tariffs. Because of the price sensitivity of its customers, Dollar Tree Inc. can't easily pass on to them the cost of the trade-war, Chief Executive Officer Gary Philbin said in its submission to Lighthizer.