Tariffs on China Will Hurt U.S.Businesses
2019-06-11
Kevin Cheung, vice president of a New York-based clothing fi rm, recently twisted his ankle and is steadily recovering from an intense burning sensation.
Yet there are no signs of the easing of the“slow burn” that his company, Lisa International, has been suffering since the U.S. initiated a tariff dispute with China last March.
As Washington increased additional tariffs on $200 billion worth of Chinese imports from 10 to 25 percent in early May and threatened to raise tariffs on more Chinese imports, this worsening trade row between the worlds two largest economies has prolonged market uncertainty.
“The clothing tariff is not in place yet, but we assume it will come soon. This is a bigger concern to me,” Cheung said.
His anxiety is shared by a growing number of U.S. industry leaders who warned the White House of the “catastrophic” impact of this trade dispute on U.S. citizens following rising costs and dwindling profi ts.
“This latest escalation means the trade war will only get worse and hit home for every American,” said a statement released on May 13 by the Tariffs Hurt the Heartland campaign, which comprises over 150 U.S. trade organizations.
Tariffs are taxes paid by U.S. businesses and consumers, and they force U.S. consumers to pay more for clothes, shoes, toys, electronics and even food while making it more diffi cult for U.S. exporters to compete, it said.
“The trade war has gone on for far too long, and the costs have grown far too high. The patience of farmers, manufacturers, businesses and consumers is wearing thin,” said the statement.
Washingtons tariff hikes will also hit the U.S. toy industry hard given “how heavily we rely on China for toy manufacturing and how thin the profi t margins already are,” said Rebecca Mond, Vice President of Federal Government Affairs at the Toy Association, a 950-plus-membered industry group.
According to a recent report by Swiss investment bank UBS, over 12,000 U.S. brickand-mortar stores that sell clothing apparel and textiles will be at risk because of the possible new tariffs.
A big wave of store closures would be highly negative and create intense inventory dislocation and discounting in addition to an impact on jobs and the economy, the report said.
The Footwear Distributors and Retailers of America estimated that the new tariffs could cost U.S. consumers $7 billion a year.
“It is time to bring this trade war to an end,”said an open letter signed by 173 footwear companies and retailers.
In a study released on May 23, the International Monetary Fund said U.S. tariff reve- nue collected from levies on Chinese goods “has been borne almost entirely by U.S. importers.”
“The bilateral trade defi cit remains broadly unchanged,” it added.
The latest U.S. tariff hikes will impose a total annual cost of $831 for a typical U.S. household, said a study posted on May 23 by the Federal Reserve Bank of New York.
“In sum, according to our estimates, these higher tariffs are likely to create large economic distortions and reduce U.S. tariff revenues,” the study said.
Frustrated by disrupted China-U.S. trade, U.S. soybean farmers yearn for “trading as usual”with China, Davie Stephens, President of the American Soybean Association, told Xinhua.
It took U.S. farmers more than 40 years to build the soybean market in China, said Stephens, warning that it will become “increasingly diffi cult to recover” as the China-U.S. trade war rumbles on.
“The tariffs need to be removed. Lets get back to trading in an open market. Thats free trade for both sides,” he said.
“To decouple the American and Chinese economies would be an economic disaster, damaging each country and the entire world,”Chairman of the Kuhn Foundation Robert Kuhn told Xinhua.
Concurring with Kuhn, Sourabh Gupta, a senior fellow at the Washington-based Institute for China-America Studies, said, “It is utterly unrealistic to decouple China and the U.S. economically. The two economies are symbiotically connected and are too interdependent to be pried apart.”
Steve Hoffman, a veteran investor and CEO of Founders Space, a leading incubator and accelerator in Silicon Valley, said mutually respectful trade “is the whole principle behind our system. And I think that principle still holds.”
“In fact, such trade wars are just disruptive to business on both sides, which create uncertainty, confusion, and the whole supply chains and everything that businesses have planned for get turned upside down,” he said.
“A mass shift of production out of China is not a viable option for our industry,” said Mond.“The infrastructure, capacity and workforce to meet consumer demand do not exist anywhere else.”