Big price hikes undercut Trump bet China will absorb tariffs
Major US retailers have not yet raised the prices of goods on shelves
[NEW YORK] US President Donald Trump says China will likely bear the brunt of his 145 per cent tariff on the world’s second-largest economy. But prices from some of the most popular sellers of made-in-China goods already suggest US shoppers will be paying a major portion of the bill.
A swathe of products on e-commerce giants such as Temu and Shein Group have seen prices soar in the US. A set of kitchen cleaning towels selling for US$1.28 on Apr 24 set the outer limit with a 377 per cent jump to US$6.10 a day later.
Discount retail app Temu is passing on nearly all of Trump’s new import taxes to US customers if they buy products directly shipped from China, with the cost of some products nearly doubling.
At rival Shein, the average price for the top 100 products in each of two key categories – toys and games, and beauty and health – jumped by more than 40 per cent as at Apr 29 from two weeks prior. Average prices for home and kitchen items were up more than 20 per cent, while women’s clothing rose 9 per cent. Cosmetic eyebrow gel previously sold at a retail price of less than a US dollar surged overnight to US$2.90.
American shopper Priscilla Blazer has been shopping on Shein for the last six years, dropping about US$100 every other month to refresh her work wardrobe and prepare for swimsuit season. But she’s been shocked at the recent price hikes, noticing the bill for some items has gone up by 50 per cent.
“I’m very upset because I really do like Shein,” said Blazer, 22, who works in corporate finance and lives in Tampa, Florida. “I’m probably not going to shop there as much and I will end up going to the mall.”
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While Trump and his advisors have argued that short-term pain is merited to bring back manufacturing to the US, prices when more goods are made in America will also be more expensive, said Justin Lin Yifu, a former World Bank chief economist who has advised China’s top leaders.
“Even if production capacity is established after two or three years, the price of production will likely be higher than the price of imports,” Lin told a conference in Beijing in April. “During this time, the prices of goods will be very high, and supply will not be sufficient.”
Shein and PDD Holdings-owned Temu did not immediately respond to requests for comment on Wednesday.
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Trump enacted levies in an attempt to force Beijing to seek a trade deal that would slash the trade deficit between the two countries, and reiterated this week that he expects China to “eat” the tariffs. While he denied there would be difficult times ahead for American shoppers, US consumer confidence dropped to a five-year low in April.
The evidence is also mounting that consumer inflation has set in and will only grow.
“We have started to see Chinese online exporters raise retail prices on Amazon and Walmart by as much as 30 per cent since earlier this month,” said Wang Xin, head of the Shenzhen Cross-Border E-Commerce Association, which represents some 3,000 exporters. “The price hikes are natural as no one can get through this level of tariff with their old pricing.”
Major US retailers have not yet raised the prices of goods on shelves. But they are caught in a bind, as Chinese suppliers refuse to absorb tariffs and uncertainty mounts over how long the extra levies will be in place.
Companies such as Walmart and Target could also come under political pressure to absorb some – if not all – of the cost increases, which could help cushion the direct impact on shoppers.
The example of Amazon – which said on Tuesday that it would not display the cost of US tariffs on products, after the White House slammed the reported move and Trump complained to Jeff Bezos – underscores the difficult position US consumer retailers are in. If they do not pass on cost increases, profit margins will narrow and become a drag on their stock price.
For the first time in more than 10 years, Walmart recently asked one of its Christmas ornament factories in Zhejiang province to leave price stickers off items. The factory’s vice-president, Barry Shan, said on Wednesday that the factory was not bearing any of the tariff costs, and that Walmart’s request to drop the stickers still stood.
Meanwhile, Dennis Zhu, co-founder of HCMobi, which sells swimming earphones, said he had not raised prices yet as his warehouse in Los Angeles currently holds about a month of stock. But he plans to add the increased duties to retail rates for consumers after his next shipment.
“As a retailer, we will not endure the tariffs ourselves,” he said.
Merchants in general still have one to two months of inventory, and how the prices will increase depends on the tariff policies when they make their next shipments, said Xiaoyan Wang, an e-commerce analyst at 86 Research in Shanghai.
“Merchants will choose to increase prices first, and see how the sales go and adjust,” she said. BLOOMBERG
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