In escalating trade war, US consumers may see higher prices

Washington, September 2

The United States and China on Sunday put in place their latest tariff increases on each other’s goods, potentially raising prices Americans pay for some clothes, shoes, sporting goods and other consumer items before the holiday shopping season.

President Donald Trump said US-China trade talks were still on for September.

“We’ll see what happens,” he told reporters as he returned to the White House from the Camp David presidential retreat. “But we can’t allow China to rip us off anymore as a country.”

The 15 per cent US taxes apply to about USD 112 billion of Chinese imports. All told, more than two-thirds of the consumer goods the United States imports from China now face higher taxes.

The administration had largely avoided hitting consumer items in its earlier rounds of tariff increases.

But with prices of many retail goods now likely to rise, the Trump administration’s move threatens the US economy’s main driver: consumer spending. As businesses pull back on investment spending and exports slow in the face of weak global growth, American shoppers have been a key bright spot for the economy.

“We have got a great economy,” said Sen Pat Toomey, R-Pa. “But I do think that the uncertainty caused by volatile tariff situation and this developing trade war could jeopardise that strength, and that growth, and that is, I think, that’s a legitimate concern,” he told ABC’s ‘This Week’.

As a result of Trump’s higher tariffs, many US companies have warned that they will be forced to pass on to their customers the higher prices they will pay on Chinese imports.

Some businesses, though, may decide in the end to absorb the higher costs rather than raise prices for their customers.

In China, authorities began charging higher duties on American imports at midday on Sunday, according to employees who answered the phone at customs offices in Beijing and the southern port of Guangzhou. They declined to give their names.

Tariffs of 10 per cent and 5 per cent apply to items ranging from frozen sweet corn and pork liver to marble and bicycle tires, the government announced earlier.

After Sunday’s move, 87 per cent of textiles and clothing the United States buys from China and 52 per cent of shoes will be subject to import taxes.

On December 15, the Trump administration is scheduled to impose a second round of 15 per cent tariffs—this time on roughly USD 160 billion of imports. If those duties take effect, virtually all goods imported from China will be covered.

The Chinese government has released a list of American imports targeted for penalties on December 15 if the US tariff hikes take effect. In total, Beijing says Sunday’s penalties and the planned December increases will apply to USD 75 billion of American goods.

Washington and Beijing are locked in a war over US complaints that China steals US trade secrets and unfairly subsidises its own companies in its drive to develop global competitors in such high-tech industries as artificial intelligence and electric cars. AP