$300 billion worth of tariff anxiety is flooding into D.C. from June 17-25. Several hundred industry executives are in the nation’s capital to testify and plead against President Trump’s proposal to expand tariffs to an additional $300 billion of Chinese imports.
While previous rounds of Trump administration tariffs have targeted industrial and commercial goods, the proposed expansion is breathing down the necks of shopping malls, main streets, and e-commerce – and could affect verticals as diverse as the live animal and exotic wax industries.
There are already more than 2500 comments about the tariffs posted to the page of the gov’t office holding the hearings.
I’ve read through a wild amount of them – and in addition to the general consensus of “We’re serious, please don’t do this!”, there are several important ramifications that retail and supply chain professionals will have to grapple with should tariffs expand:
- Price hikes would be on the way as retailers pass off tariff costs to consumers
- Production duties would be shifted to manufacturers outside of China – costing time, money, and efficiency
- Consumers could be forced away from products and industries altogether by costs rising too much for personal budgets
- We could see dips in product quality as retailers bypass third-party brands, which have historically worked as curators and quality control
The Consumer Technology Association did a deep dive into possible effects of the proposed tariffs on cell phones, laptops/tablets, gaming consoles, and toy drones… and it doesn’t hold good news for consumers.
When it comes to phones the report predicts prices would “…rise across the board. The cost of cell phones imported from China would rise by 22 percent. Overall U.S. prices for cell phones generally (from all sources combined) would rise by 14 percent, or by nearly $70 for the average retail price of a cell phone today (estimated at $492) . . . The result, even after accounting for new tariff revenue, is a net $4.5 billion loss for the U.S. economy, with the burden carried by U.S. consumers.”
Foreign Producers Outside of China
The biggest winners from tariffs on phones and their components would be foreign producers outside of China. The CTA estimates Korea and Vietnam “would see annual export revenues grow by about $1.8 billion and $1.2 billion, respectively.”
Footwear supply chains would also be uprooted. In comments ahead of her testimony, New Balance VP of Responsible Leadership and Global Compliance Monica Gorman explains that expanding tariffs would “…risk our company’s overall financial health, which will, in turn, limit our ability to maintain and reinvest in our American factories.” Interestingly, this stance is a reversal from the sneaker maker’s previous comments when it welcomed Trump’s stance on trade back in 2016.
While cell phones and shoes are effectively hard baked into society as necessities, businesses whose revenue depends on disposable income are worried the additional tariffs could price some buyers entirely out of markets. As fishing gear brand Zebco CEO Steve Smits states in his request to testify, “Increased costs, especially at lower price points, will surely result in many American families being unable to afford this past time.”
Smits also believes product quality could take a hit should the new tariffs take effect. According to him, retailers could decide to offset tariffs by purchasing directly from Chinese manufacturers, circumventing Zebco’s third-party quality control.
“Another significant unintended consequence of these duties are the potential incentive retailers may perceive to bypass U.S. companies, like Zebco, and purchase product directly from Chinese manufacturers under private label brands in an effort to offset tariffs and maintain the desired retail price point.”
The Wrap Up
The testimony in D.C. got underway less than a week after roughly 600 retailers and trade associations penned a letter to President Trump, asking him to reconsider additional tariffs.
Based on Commerce Secretary Wilbur Russ’s response, however, the letter doesn’t appear to have had much effect on the White House’s plans as Trump is “perfectly happy” to continue with tariff rollouts.
Hopefully, in-person testimony from 300 industry leaders will carry more weight than a letter from 600… otherwise, it seems clear we’re headed toward more expensive fishing poles – and fewer fishermen.