Trump is pulling American consumers into its escalating battle with China

Jim Tankersley
Shoppers at a Costco Wholesale store in East Peoria, Illinois.
Daniel Acker | Bloomberg | Getty Images

The administration’s trade fight with China may soon be fought in the aisles of Walmart, Best Buy, REI and Costco.

President Trump’s latest round of proposed tariffs on Chinese goods would finally pull American consumers into an escalating trade war that they have, thus far, mostly watched from a distance.

Administration officials took pains in their first batch of Chinese tariffs to largely shield consumers from seeing immediate price increases on products they buy. The $34 billion round imposed on July 6 focused largely on goods that businesses purchase, which do not typically appear on store shelves, such as aircraft parts and industrial machinery.

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But the list of $200 billion worth of products administration officials proposed hitting with tariffs on Tuesday would push up prices at many American retailers. The tariffs would be lower than the previous round — 10 percent instead of 25 percent — and they still mostly avoid apparel, one of the most visible product lines that Americans buy heavily from China. But they include electronics, food, tools, housewares and a wide range of other consumer goods. The tariffs would not go into effect for several months and may not happen at all if the United States and China are able to resolve their differences.

Economists say that expansion will drive inflation higher and erode Americans’ purchasing power, potentially hurting economic growth. Inflation is already rising, the Labor Department reported on Thursday, driven largely by energy prices. The Consumer Price Index rose 2.9 percent in June from a year ago, its highest rate of the last six years.

The rate is lower — 2.3 percent — for core inflation, which excludes energy and food prices. Home furnishing prices have barely risen at all over the last year, and prices for information technology hardware and services have fallen by 2.3 percent in that time.

But retail groups say a prolonged trade war could accelerate price increases on a wide range of consumer goods, giving Americans sticker shock on some of their favorite items.

“You keep adding tariffs upon tariffs,” said Alex Boian, vice president for government affairs at the Outdoor Industry Association, whose members include such recreation titans as North Face and Patagonia, “and it really is difficult to see a way that this does not hit retail prices.”

The latest tariff list includes several mainstay products of the outdoor industry, such as travel bags, backpacks and the knit fabric used in fleece vests. It also includes dog collars, sledgehammers, saw blades, baseball mitts, ski gloves, toilet paper, art supplies, ceramic tiles, windshield glass and antiques that are more than 100 years old.

There are also seemingly random — and likely not household — products on the list, like bovine semen and horsehair.

More than 1,000 of the 6,000 items on the list are chemicals, according to an analysis by Panjiva. Nearly 1,000 more are food products, including vegetables like cabbage, kale, carrots and beets and hundreds of types of fish. Many of those fish, such as Alaskan pollock, are caught elsewhere and processed in China.

In dollar terms, the items most likely to rattle American consumers are computers and couches. The Panjiva analysis shows that $50 billion worth of goods subject to tariffs are electronics, including $17.4 billion in PC components and $5.2 billion in desktop computers. Nearly $30 billion worth of the products are furniture. In addition, the administration will soon begin imposing 25 percent tariffs on more than $3 billion worth of semiconductors, potentially driving up computer prices even more.

Buying a new PC or sofa is a major purchase for most Americans, and a 10 percent tariff could force many consumers to seek out cheaper brands or delay the purchase. It seems unlikely that stores will absorb the import taxes by accepting lower profit margins. But American consumers might not have much choice but to pay them: For nearly $100 billion of the products targeted, Panjiva estimates, China supplies more than half of the imports that Americans buy.

As the tariffs expand to cover roughly half of all Chinese goods exported to the United States, consumers will start seeing price increases on store shelves, said Mary Lovely, a senior fellow at the Peterson Institute for International Economics.

“It is possible that they can scoot around some of the effect on consumers, but it gets increasingly difficult,” she said. “It also gets further and further away from the stated rationale of the tariffs, which is to hit high-tech products.”

The National Retail Federation said in a statement on Tuesday that the threat posed by tariffs to the American economy “is less about a question of ‘if’ and more about ‘when’ and ‘how bad.’”

The trade group said that the sheer scope of the tariffs “make it inconceivable that American consumers will dodge this tax increase as prices of everyday products will be forced to rise.”

Anyone who has tried to buy a washing machine this year knows how fast tariffs can translate to price hikes. The Trump administration imposed tariffs on imported washing machines, of up to 50 percent, in January. Since then, laundry equipment prices have jumped 17 percent, according to Labor Department data.

Economists warn that a batch of similar price spikes could complicate the Federal Reserve’s efforts to maintain a gradual pace of interest rate increases, by juicing inflation more than economists had expected. Rising prices would cut into Americans’ purchasing power, which has remained an engine of growth in the recovery from the great recession.

“Tariffs are just a real income hit to consumers,” said Ian Shepherdson, chief economist for Pantheon Macroeconomics. “There’s no question that these tariffs will dampen growth.”

Ana Swanson contributed reporting.