The trade fight between the world’s two economic titans is about to make dozens of household goods more expensive for U.S. shoppers while thousands of miles away in China, consumers appear set to escape much of the pain.
President Donald Trump is said to be intending to pull the trigger on tariffs targeting $200 billion of Chinese imports now that a midnight Thursday deadline for public input has passed. Such a move — his biggest salvo in the fight with China so far — also hits at the heart of the American household, risking price increases for everyday items from refrigerators and freezers to cutlery and towels.
“It seems unlikely the tariffs are not implemented as the U.S. administration believes that they are winning the trade war and will be in a stronger position to negotiate if they put more pressure on China,” JPMorgan analysts wrote in a note.
Beijing has vowed to retaliate. But the targets it has selected — and the fact China’s imports of U.S.-made goods are dwarfed by what it exports — means the world’s biggest consumer market will be largely shielded from the spat.
The country’s counterpunch tariffs on $60 billion of imports from the United States focus on manufacturing components, chemicals and medical instruments. And many of the ready-to-buy American goods that will be subject to duties by the Chinese government are hardly mass-market: yachts, riding crops and wigs.
“Mostly, it’s going to be absorbed by Chinese corporates instead of consumers,” said Larry Hu, a Hong Kong-based economist at Macquarie Securities Ltd. “At the bottom line, the direct impact is very small.”
The differing lists of tariffs drawn up by the United States and China reflect the trade imbalances between the two nations: U.S. imports from China were about $505 billion in 2017, much of it electronic goods, household furnishings and clothing. But only $130 billion of products — including soybeans, aircraft, machinery and plastics — went the other way, reflecting China’s role as a manufacturing base, U.S. figures show.
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New data out Wednesday showed the U.S. goods deficit with China in the seven months through July this year widened about 8 percent to $234 billion from the same period in 2017.
That trade-flow mismatch is helping President Xi Jinping protect Chinese consumers from the conflict, partly because he has comparatively fewer U.S. imports to tax. But if Trump follows through with tariffs on $200 billion of Chinese imports, it will be tough for American households to emerge unscathed.
To be sure, Chinese consumers may see some less direct fallout, through the cost of food.
In July, China slapped retaliatory tariffs on a range of U.S. agricultural products including soybeans, corn and sorghum, used to feed pigs in the world’s biggest pork-producing nation.
The combination of those levies on $50 billion of imports from the United States, and the $60 billion under consideration now, could ultimately inflate shopping bills if manufacturers and producers pass the costs on to customers, according to Morgan Stanley economists. The bump to consumer prices could be 0.3 percentage points, they said in a Sept. 3 report. That said, China has indicated it will just source its pig feed elsewhere.
China’s plans for tariffs on $60 billion of U.S. goods includes an additional 5 percent on U.S. products including planes and dairy machinery, and another 10 percent on items including wigs and textiles. There’s an extra 20 percent on some chemicals and paper, and an additional 25 percent on products such as meat and wheat.
But beyond these tariffs, China can’t match Trump’s threats dollar for dollar. The government would have to retaliate in other ways, such as increasing regulation of U.S. companies in China — measures that don’t directly put the consumer in the firing line but make it harder for U.S. companies to conduct business there.
Reuters contributed to this report.