President Donald Trump put consumers, companies and manufacturers on notice Aug. 1, announcing that the largest batch of tariffs to date on imports from China will go into effect Sept. 1.
In a tweet, Trump called the proposed 10% tariff on $300 billion of Chinese goods a "small additional tariff." Earlier, Trump accused Beijing of reneging on prior commitments to quell the escalating trade spat between the two economic powerhouses.
"We thought we had a deal with China three months ago, but sadly, China decided to re-negotiate the deal prior to signing," Trump tweeted. "More recently, China agreed to buy agricultural product from the U.S. in large quantities, but did not do so."
Trump, however, warned that the rate of the tariffs on $300 billion of Chinese goods could rise to 25% and "well beyond" depending on how talks go. He told reporters Aug. 1 that the 10% level is for the "short term period" and that the U.S. can "always do much more or less" with respect to a deal.
"This can also be lifted in stages," Trump said. "We're starting at 10% and can be lifted up to well beyond to 25%. But we're not looking to do that necessarily."
Trump also accused Chinese President Xi Jinping, whom he met with in June at the G-20 summit in Japan, of not preventing the sale of the drug Fentanyl to the U.S., which he said continues to kill Americans.
Producers and sellers of goods that include laptops, smartphones, televisions and microwaves spent much of the spring lashing out at the thought of additional tariffs on a $300 billion batch of goods. The new tariffs, initially proposed in May after being first floated in September 2018, include a bevy of consumer goods exempt from prior iterations of tariffs on China. Producers and sellers had warned of massive job losses, a reduction in U.S. GDP and a spike in costs for families should the tariffs be imposed.
According to Chris Rogers, a research analyst for Panjiva, the largest product groups in the batch include smartphones, laptops, toys, video games and clothing.
The Office of the U.S. Trade Representative and the White House did not immediately return a request for comment on whether the tariffs would be raised to 25% should the two nations fail to reach an agreement.
The tariff announcement was met with immediate concern from a number of trade groups — as well as the U.S. Chamber of Commerce — warning of higher prices for consumers as back-to-school shopping nears.
"We urge the two sides to recommit to achieving progress in the very near term before these new tariffs come into effect, and to remove all remaining tariffs as swiftly as possible," Myron Brilliant, the Chamber's executive vice president and head of international affairs, said in a statement.
China accounts for about 70% of all shoes sold in the U.S., and the 10% tariffs, which target shoes, will have a "chilling effect" on hiring in the industry, said Matt Priest, president and CEO of Footwear Distributors and Retailers of America.
"We will not take this news lying down," Priest said.
The announcement follows two days of high-level talks between the two countries' top negotiators that concluded July 31 in Shanghai. The White House said following the talks that the two sides discussed systemic issues like forced technology transfer, intellectual property rights and nontariff barriers, as well as a Chinese commitment to increase purchases of U.S. agricultural products. But no deal was reached to end the crippling trade spat that has already resulted in tariffs on $250 billion of Chinese goods and retaliatory tariffs on $110 billion of U.S. exports.
U.S. and Chinese negotiators are slated to continue trade talks in Washington in early September. At least one top-ranking Democrat is concerned about a strategy heading into those meetings.
"I am always first in line for getting tough on China," Senate Finance Committee Ranking Member Ron Wyden, D-Ore., said in a statement. "But Trump doesn't have any strategy to get China to stop cheating on trade — the only thing he knows how to do is raise tariffs."
Washington has already imposed 25% tariffs on three separate tranches of Chinese goods: a $34 billion batch in July 2018, a $16 billion batch in August 2018 and a $200 billion batch in September 2018. The latter tranche began as a 10% tariff before it was raised to 25% earlier this year following a breakdown in talks. Those three tranches targeted primarily industrial goods and spared consumer goods.
But the $300 billion batch — which also includes chemicals, clothing, books and textiles — could cause a spike in prices for companies and consumers, something that analysts say could be a self-inflicted wound as Trump heads into the 2020 election campaign.
Analysts have told S&P Global Market Intelligence that the next steps in the trade war following a fourth tariff tranche imposition could lead China to retaliate by further currency devaluation and the threat of stifled Chinese tourism to the U.S.
Despite the clear escalation in tensions, Trump capped his Aug. 1 tweet by saying that the "future between our two countries will be a very bright one."
Panjiva is a business line of S&P Global Market Intelligence, a division of S&P Global Inc.