Business groups are warning Washington that adding further tariffs on imported Chinese goods will start having noticeable negative effects on the economy.
Companies say they have weathered the increases so far thanks to careful planning, but are running out of room to maneuver at the same time that President Trump has threatened to escalate the fight by placing new tariffs of up to 25% on $300 billion worth of goods.
Owners say that effects of the tariffs have been mitigated so far through methods such as shifting to suppliers outside China, building up inventory by purchasing goods ahead of when the tariffs would go into effect, and cutting costs, but they have reached the limits of what they can do in those areas.
“While we have shifted some imports to manufacturers in other countries over the past year, there simply is not the infrastructure to manufacture the volume and quality of items we require other than China,” said Wade Miquelon, president of Jo-Ann Stores, an Ohio-based fabric chain. “Due to the lack of alternate sources we have no option but to continue to import items from China.”
Others have managed to avoid the tariffs altogether up until now but expect to get hit should the ones on the $300 billion group go into effect next month as Trump has threatened.
[Also read: Business groups warn new Trump China tariffs threat hurts ability to plan]
“We will have no choice but to absorb the costs of the tariffs and therefore reduce the profits of our company or pass the costs along to the consumer,” said Jay Foreman, president of Basic Fun!, a Florida-based toy company. “If we get 10% tariffs, we’ll have to reduce our headcount by 10%. If it’s 25% tariffs, then the headcount is reduced by 25%. The money has to come from somewhere.”
A survey released Wednesday by Tariffs Hurt the Heartland, an ad-hoc coalition of businesses calling for an end to the trade war, found that American businesses and consumers paid a combined $6 billion in tariffs in June 2019, up from $3.5 billion the last year. About 75% of the increase came from the tariffs on Chinese products, which currently cover just $250 billion worth of goods. The next round of tariffs set to go into effect in September will cover $300 billion worth of goods.
A separate survey released Wednesday by the Consumer Technology Association, a trade group, found that the industry paid $1.7 billion in tariffs in June, eight times the level it paid at the same time last year even though it saw a 39% decrease in imports due to the trade war. The next round of tariffs, CTA said, would double the cost to the industry to $3.5 billion.
The administration’s push for additional tariffs has meant that items that were previously excluded on the grounds that they could only be gotten from China could now be covered in the next round of tariffs. “While we were lucky enough to get our products removed from the previous list they were put back on in the fourth one, so we are now be subject to 10% tariffs in September,” said Win Cramer, chief executive office of California-based JLab Audio, a technology company. He said he will have to lay off workers or charge higher prices to compensate.
The White House has disputed that tariffs have a negative effective on the economy. Officials have pointed to the economy remaining strong as proof. “These same groups said the same kinds of things when the tariffs began. We’re just not seeing it,” White House trade policy adviser Peter Navarro told Fox News Sunday.
That the White House can say that is an ironic result of the efforts businesses have put into compensating for the tariffs, said Daniel Ujczo, a trade policy lawyer with the firm Dickinson Wright. “I don’t think they fully appreciate why companies were able to swallow the tariffs,” Ujczo said. “At this time last year when the tariffs first started to come on, what did most companies do? The overwhelming majority bought around the tariffs. They bought huge inventories. Those inventories are out and companies are now forced to buy items with tariffs when they have been for the last year.”
