On Black Friday and Cyber Monday, shoppers will be out in force looking for holiday sales. But amid the shopping frenzy there’s a rotten deal: the ongoing trade war.
To push back on China’s unfair trade policies, President Trump initially slapped tariffs on $50 billion worth of Chinese goods. Then the White House announced additional 10 percent tariffs on another $200 billion worth of goods that took effect on Sept. 24. Those tariffs are set to increase to 25 percent just after the holiday season.
Now, with the prospect of a deal with China slipping after a contentious summit meeting last week, the U.S. is poised to put tariffs on an additional $267 billion of Chinese imports in early 2019.
If the trade war runs its course, shoppers can expect higher prices on televisions, sweaters, Christmas ornaments, and just about every other holiday favorite in the new year.
U.S. companies and manufacturers dependent on machines made overseas will be left with no choice to charge consumers more in the long term.
The trade war, however, is already leaving merchants in a bind this Christmas season.
Existing tariffs, best thought of as taxes, have left companies with unsavory choices. As purchasing and pricing decisions are made months ahead of the holiday season, before the tariffs were introduced, they can either pass increased costs on to consumers by raising prices or eat the cost of the current tariffs, cutting into already slim margins. For now, raising prices is unpopular: likely to both hurt the overall performance of the products, potentially give ground to competitors, and perhaps be seen as a political statement, leaving companies to absorb the cost of tariffs.
With the worst of tariffs yet to come, the choices for consumers and retailers are only going to get worse. That’s in part by design: The tariffs already imposed affect a specific list of items that exclude popular purchases like Apple Watches and necessities like highchairs. The third round, placing tariffs on pretty much everything from China, would likely have far fewer exemptions.
For now, though, the approved exemptions have clear winners picked by government policy. Apple, for example, successfully lobbied to keep its most popular products like Air Pods and Apple Watches tariff-free. Other large companies have been able to warehouse inventories, stocking up to avoid paying premiums once tariffs take effect.
Smaller stores without extra money to spend on lobbying or space to spare are forced to pay the premiums, jeopardizing their business.
For consumers and the United States, the result is a distorted market and a lose-lose situation. Higher prices, lower company earnings, and state-picked winners translate into a bad deal for the economy.
So this Black Friday, perhaps it should be Trump who gets serious about deal-hunting.
