US consumers in firing line as new China tariffs kick in

US consumers in firing line as new China tariffs kick in

Washington added tariffs of 15 per cent to $112bn of goods from China on Sunday, expanding the trade war in a move that will probably raise prices for American consumers.

In retaliation, China triggered the imposition of additional tariffs on US goods including crude oil.

Until now tariffs levied by the Trump administration have raised costs for businesses with supply chains that reach across the Pacific. Inflation remains low in the US, and importers have had difficulty passing their costs on to consumers.

The new tariffs, however, will hit “final goods” such as shoes and clothing, and could show up in household costs in the autumn.

“Trump’s newest tariffs are bad news, but don’t expect consumers to start seeing the result of higher prices today,” said Chad Bown, who follows trade for the Peterson Institute for International Economics in Washington.

“It will take a bit of time for the more expensive clothes and shoes now being unloaded at the ports to make it on to store shelves and into online retailers’ warehouses.”

Trade threats against China and Mexico have depressed business investment in the US for the past year, and it declined in the second quarter of 2019. But consumer spending, an important part of America’s economy, has remained strong.

July spending data published on Friday by the Department of Commerce showed continued growth, though a survey by the University of Michigan released on the same day showed a drop in consumer confidence in August, to its lowest level since the election of President Donald Trump.

One in three respondents to the Michigan survey mentioned tariffs as a reason for concern.

Under the current schedule, tariffs on consumer goods will expand further to include toys and sports equipment on December 15.

Speaking on ABC’s This Week Pat Toomey, a Republican senator from Pennsylvania, expressed hope that the tariffs were part of a larger plan to protect US companies operating in China.

“If we get the Chinese to change their behaviour in a meaningful way in that area, and then drop the tariffs, then we will have ended up in a better place,” he said. “In the meantime, we’re doing damage. It’s a double-edged sword.”

Speaking to reporters on the South Lawn of the White House, the US president said his administration was still negotiating, but “we can’t allow China to rip us off any more”. He said the US would meet China for more trade negotiations later this month.

On Sunday Mr Trump retweeted the comments of Peter Morici, an economist, who said the tariffs would not affect US consumers that much “because the Chinese currency has gone down, which gives our importers a discount. Importers can find suppliers outside of China.”

Chinese’s official Xinhua news agency said: “The United States should learn how to behave like a responsible global power and stop acting as a ‘school bully’. As the world’s only superpower, it needs to shoulder its due responsibility, and join other countries in making this world a better and more prosperous place. Only then can America become great again.”

Additional reporting by Reuters

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