Shoppers in the United States may have little to cheer about this holiday season if US President Donald Trump makes good on his threat to raise tariffs on Chinese goods, a move that could send prices of cellphones, laptops, and toys soaring less than two weeks before Christmas.
Trump warned this week that he would raise tariffs “substantially” on Chinese goods if both sides failed to reach a deal, which he had said was “close” without offering further details.
Trump’s threat was a reference to previously announced 15 percent tariffs on about $156bn worth of Chinese-made consumer goods scheduled to take effect on December 15, according to multiple trade experts and a source close to the White House.
Known as the 4B list of goods, those tariffs would hit video game consoles, computer monitors, Christmas decorations and other items often given as gifts.
In another development, trade talks between the US and China hit a snag over farm purchases, with China wary of making a numerical commitment in the text of a trade agreement, people familiar with the matter told the Wall Street Journal.
Trump said earlier that China has agreed to buy up to $50bn of soybeans, pork and other agricultural products from the US. But Beijing wants to avoid cutting a deal that looks more favourable to the US than China, WSJ quoted unidentified sources as saying.
China wants to have flexibility within the agreement should trade tensions escalate again, it reported, with one Chinese official saying, “We can always stop the purchases if things get worse again.”
Stocks fell across Asia and Europe and initially in the US as investors digested the developments and optimism waned over trade talks between the two sides.
Trump’s threat, and the markets’ reaction, illustrate how volatile the trade talks between the US and China remain, and how important they are to the global economy.
The US administration hopes to avert the December 15 tariffs, if possible, said William Reinsch, a former senior US Department of Commerce official and trade expert at the Center for Strategic and International Studies.
More so than previous tariffs, these would hit consumers particularly hard at a sensitive time, he said. “Trump does not want to do that right before Christmas. The optics would be terrible,” he said.
White House advisers said last week the December 15 tariffs would likely be averted if a “phase one” trade deal was reached.
While most goods that Americans will buy before Christmas had been shipped long before, the imposition of the tariffs could trigger some “opportunistic price increases” on the part of retailers, he added.
Reinsch and other experts said they still expected Washington and Beijing to reach a “phase one” agreement before that point, but the timing was looking less certain.
“We’re in sort of a dangerous moment because both sides feel they have the upper hand, but I don’t think the talks have collapsed,” Reinsch said.
Trump could theoretically increase tariffs already imposed on $250bn of Chinese goods, according to congressional aides, former US officials, and trade experts. There is no indication the White House is considering that at this time.
Trump had agreed in October to skip raising those tariffs to 30 percent from the 25 percent rate in place now. That would affect goods ranging from industrial components and semiconductors to furniture and building supplies.
A 15 percent tariff on about $125bn of goods that went into effect on September 1, including flat-panel television sets, flash memory devices, smart speakers, Bluetooth headphones, bed linens, multifunction printers and many types of footwear, could also be increased, trade experts said.
People familiar with the discussions say China has asked for these September 1 tariffs to be lifted completely.
But Robert Lighthizer, the US trade representative, is unwilling to roll back existing tariffs on Chinese imports, including widely criticised levies on consumer items, unless Beijing shows more flexibility on Washington’s demands, a person familiar with the negotiations told WSJ.
Scott McCandless, principal at PwC, said he was still fairly optimistic about the two sides reaching a “phase one” deal, given the positive effect it would have on key constituencies such as farmers in advance of the 2020 presidential election.
More tariffs on consumer goods are unlikely, he said. “Consumers have been a bright spot in the economy, so they will want to avoid any impact on that,” he said.