U.S. companies are bracing for a prolonged trade skirmish between the U.S. and China as concern mounts that President Trump can’t strike a deal at this week’s G-20 summit to prevent higher tariffs.
Their pessimism, which runs counter to bullishness from the White House on the planned meeting between Trump and Chinese President Xi Jinping in Buenos Aires, reflects the reality that any agreement is unlikely to immediately address key American complaints like China’s theft of U.S. intellectual property.
Trump, whose tariffs on competitors and allies alike have pushed up corporate America’s supply costs and prompted warnings from economists about slower growth, has already threatened to more than double duties on $200 billion in Chinese goods to 25 percent. He has also proposed levies on $267 billion in new shipments that have so far been unaffected.
Businesses aren’t taking any chances. Home Depot and others are rushing to increase their imports before higher tariffs can be imposed, and many firms have said they will raise consumer prices to protect their profit margins.
Billions of Dollars are pouring into the coffers of the U.S.A. because of the Tariffs being charged to China, and there is a long way to go. If companies don’t want to pay Tariffs, build in the U.S.A. Otherwise, lets just make our Country richer than ever before!
— Donald J. Trump (@realDonaldTrump) November 29, 2018
Dick’s Sporting Goods is trying to negotiate better deals from Chinese vendors while other firms are weighing whether to move operations form China and into countries like Vietnam, the Philippines, Sri Lanka, and Bangladesh.
[Related: Retailers plan for blockbuster holiday season despite tariff overhang]
“Industry is hunkering down and realizing this is going to go on potentially for years,” Alex Capri, a visiting senior fellow at the University of Singapore and the former managing director for KPMG’s international trade practice, told the Washington Examiner.
To date, most experts believe a strong economy has curbed the pain of Trump’s tariffs, though economists have cautioned that’s unlikely to last as the duties increase and the disputes drag on. Already, stock-market volatility is driving concern that the economic expansion of the past few years is coming to an end and corporate earnings growth in 2019 is unlikely to match this year’s highs.
“The ongoing trade dispute between the U.S. and China is likely the single greatest risk to both economic activity and financial markets over the intermediate term,” Russell Price, chief economist at Ameriprise Financial, wrote in a recent report. “Unfortunately, we believe the situation could still get worse before getting better.”
As a result of companies accelerating imports, the U.S. economy could shrink in the fourth quarter of 2018, according to Price.
“That will likely cause a big fallout in imports from China, then, in the first quarter of 2019,” he said in a recent interview.
Some U.S. companies are already seeing dwindling sales in China, stoking fears that the ongoing tit-for-tat between Trump and Xi is dissuading Chinese consumers from purchasing American goods.
Apple’s sales in the country grew just 16 percent in the three months through September, the slowest pace of the consumer electronic giant’s five major markets. Car manufacturers like General Motors and Ford Motor Co. are also reporting deceleration.
It’s not just tariffs that are worrying businesses. The White House is reportedly preparing to employ export controls and other tools to block Chinese theft of intellectual property. While such a move addresses a key complaint from U.S. businesses, the action may have significant collateral effects and spur Beijing to retaliate in-kind.
China, for example, reportedly uncovered antitrust violations at Micron Technology Inc. after the U.S. accused a Chinese-owned company of stealing trade secrets from the Boise, Idaho-based firm.
