Trump's next $100 billion tariff dilemma



US consumers may be about to directly feel the effects of the trade fight started by US President Trump with China and other countries this year when a new list of Chinese imports to be taxed is announced in coming days.

After imposing import tariffs on solar panels and washing machines in January, Trump moved to levy steel and aluminum in March along with about 50 billion US dollars in other goods.

After China responded with a list of US goods that would be subject to tariffs, Trump raised the stakes on April 4 by directing the US Trade Representative to consider 100 billion US dollars in additional levies.

But a Reuters analysis of Chinese imports shows that to quickly reach 100-billion-US-dollar worth of goods to tax, Trump may have to target cellphones, computers, toys, clothing, footwear, furniture and other consumer goods, prompting price rises at US retailers.

“There is no way to avoid consumer products when you’re thinking about how to hit 100 billion US dollars worth of imports coming from China,” said Hun Quach, vice president of international trade for the Retail Industry Leaders Association which represents US retailers.

How much the new tariffs would hit wallets depends on variables that make calculating the impact of the tariffs on individual products hard to measure. Companies can absorb some of the costs, and some companies can shift production in China to other countries, cutting the final bill for America’s shoppers.

After washing machines imported by LG Electronics’ were hit with a 20 percent tariff in January, the company raised US prices by about 50 US dollars per machine, or four percent to eight percent.

LG opted to absorb part of the tariff cost, which was imposed at a time when construction was already well underway on its new US factory that will begin producing washers in late 2018, avoiding US tariffs.

Companies with complex supply chains, mainly those in high technology industries, can also change how their internal costs are charged among subsidiaries to lower their tariff bill.

Trump’s first round of import tariffs deliberately left most consumer electronics untouched, but out of the 506 billion US dollars in US imports from China last year, finding another 100 billion US dollars to tax without hurting US shoppers will not be easy.

The USTR could quickly find 100 billion US dollars but at the cost of targeting three broad categories of consumer electronics – cellphones at 44 billion US dollars, computer equipment at 37 billion US dollars, and voice, image and data recorders at 22 billion US dollars.

US supply chains would also be hurt as many consumer electronics products depend on the export of American semiconductors, software and other inputs to China for assembly before being imported back to the US.

US allies, including South Korea and Japan, also supply cellphone parts for companies like Apple Inc, including displays, cameras and fingerprint scanners, and would feel the impact.

“You end up shooting yourself in the foot, shooting your allies in the foot, and maybe you wound China’s big toe,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics.