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This column is based on data from Global Trade Atlas.
All year, even as the Trump administration and Chinese leaders fired round after round of new tariffs at each other, both sides targeted mostly industrial goods that absolved middle-class shoppers of any significant impact, like steel, aluminum, and semiconductors. Apple's computers, iPhones and watches, for example, went unscathed.
It wasn't working: Chinese exports to the US increased 9% to $296.8 billion over the first seven months of 2018. Merry consumers said they weren't seeing any price increases.
That truce on retail goods will be lifted today when the US imposes 10% duties on $200 billion worth of Chinese goods. The list includes thousands of products, from furniture and baseball gloves to spices and dried fruit. In retaliation, China will put duties of 5% to 10% on $60 billion worth of US goods, including textiles, car parts and meat.
For the first time, the trade war is targeting retail and its supply chains.
In a letter to Mr. Lighthizer, the National Retail Federation warned that the new tariffs included "products purchased by nearly every American household." Many, it added, "are staples, and account for relatively large shares of total household spending of lower-income households (food, beverages, personal care products, appliances, for example)." The impact, it said, would be "higher prices, product unavailability, even shortages - just as we enter the Holiday selling season."
Lobbying by the NRF and members such as Wal-Mart and Target, succeeded in keeping the tariffs at 10%, instead of 25% as had previously been planned, but it couldn't prevent them.
One exception: After months of lobbying, Apple managed to earn exemptions for its top-selling watches and phones.
This round of tariffs will have two main impacts.
For one, as Wal-Mart put it in a letter to USTR, it will "raise prices on consumers and tax American business and manufacturers." Target warned that the tariffs could cause Americans to pay more for pens, calculators and other school supplies.
In a study, the NRF concluded that a 25% tariff on furniture could increase Americans' annual bill by $4.5 billion. The study underscore how reliant the US has become on Chinese imports for certain products.
US furniture imports, first 7 months, 2018
In the short term, the price increases will be impossible to avoid. As the NRF said, "retailers are making their purchasing decisions anywhere from six to nine to 12 months in advance. So, making changes today to reflect the imposition of new tariffs would not be possible to affect those deliveries - i.e., to find lower cost alternatives."
And retailers won't always be able to pass along those price increases to consumers. For some goods, such as "paper gift bags, journals, and gift wrap", the prices are printed on the goods. "It will take months to manufacture new paper products with higher prices reflective of the tariffs; in the interim, the cost impact of tariffs applied to these high-volume imports will fall squarely on retailers who sell them."
A second major consequence of the tariffs will be to send big retail outlets scouring other countries for new sources of supply.
The trade war, the NRF said, "has already started a scramble among importers to find alternative sources of supply," which, it said, is "bidding up prices for these goods already from all possible alternative manufacturers."
Although US imports of toys and games illustrate the US's reliance on China for entire categories of goods, the dramatic increases in imports from minor trading partners such as South Korea, Japan and Germany shows how US buyers have already started looking elsewhere.
Top sources of US toys and games, first 7 months, 2018
The hope for the Trump administration, of course, is that US factories will start churning again, replacing Chinese imports with goods Made in the USA.
That will happen to some extent, but nowhere near now much the administration hopes. The NRF, in a study, concluded that a tariff on "travel goods", such as wallets, handbags and camera cases, would boost US production by 1.5% to 3.2%.
To substantially increase production, the US would have to export a lot more, and US producers are unlikely to find open markets in a world embroiled in a trade war. In addition, the US will now be competing against Chinese exporters - and a cluster of other countries -- looking for alternatives to the US.
Exports of travel goods, first 6 months, 2018
Meanwhile, even as China continues to respond with tariffs of its own, it also has the capacity to use other retaliatory means, the NRF warned, including "delays in investment approvals, failure to approve U.S. company mergers, hold-ups of agricultural products at ports until they are no longer salable, even perhaps further changes to the value of the yuan."
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