US consumers can expect 10 times the pain in next round of China tariffs
‘Amid tight labour markets and higher input costs, we think there is a risk that firms decide to pass through some of the costs to consumers’
Hong Kong— The next round in the US-China trade war could be the costliest one yet for American consumers.
The US is said to be preparing to announce tariffs on all remaining Chinese imports by early December, and the impact at the checkout counter may be as much as 10 times higher than earlier rounds of levies, according to a report from Citigroup economists.
“Amid tight labour markets and higher input costs, we think there is a risk that firms decide to pass through some of the costs to consumers,” analysts Cesar Rojas, Catherine Mann and Veronica Clark wrote in the Citigroup Global Markets report dated October 29.
“The additional tariffs on China have the potential to boost inflation even more than what we currently anticipate.”
The new penalties, which could take effect in early February, would encompass Chinese-made consumer goods like Apple iPhones and Nike shoes that the Trump administration has so far left untouched.
The impact of a 10% tariff on the $267bn of imports could be 10 times larger than the first $50bn round and double that of the $200bn tariffs in the second round, the analysts wrote.
Producers and retailers of apparel and footwear are already planning for the higher tariffs, according to Stephen Lamar, executive vice-president of the American Apparel & Footwear Association.
“Companies are looking down the road and expecting tariffs to come,” he said in an interview on October 23. “Everyone knows he’s going to do it.”
As companies consider switching to suppliers in other parts of Asia, the law of supply and demand is putting upward pressure on costs in neighboring countries, Lamar said.
“Everyone is leaving China and going to the same places,” he said. “Vietnam gets more expensive, Cambodia gets more expensive, everywhere gets more expensive.”