An employee works on a display ahead of Black Friday at a Walmart store in Chicago, November 20, 2018.
Kamil Krzaczynski | Reuters
It’s time to shop — not only for back to school, but for Christmas.
President Donald Trump’s latest threat to slap elevated tariffs on a widening selection of Chinese products could mean American shoppers will face higher prices throughout the fall and into the holidays.
Tariffs on goods traded between the U.S. and China have already increased in several stages since early 2018. Now, Trump has announced another round of tariffs on the roughly $300 billion of Chinese goods that had not already been targeted by American levies. The charge will take effect from Sept. 1.
That is in addition to the 25% tariff Trump imposed in May (up from his original proposal of 10%) on another $200 billion worth of Chinese imports.
The president has said that China will bear the brunt of the costs from the tariffs, yet experts say the burden will land squarely on U.S. consumers. (Exactly how those higher prices are passed on depends on a number of factors, including whether suppliers absorb the additional cost, source production in another country or increase prices.)
As of the latest tally, the new tariffs will mean higher prices on consumer staples, such as clothing, shoes, toys and household appliances, including toasters, coffee makers, irons, microwave ovens and hair dryers.
“This round is much more consumer-focused,” said Katheryn Russ, a University of California, Davis, professor of economics and specialist in international trade. And once implemented, “price increases should start filtering through from mid-October.”
A report prepared for National Retail Federation found the proposed new round of tariffs would cost Americans $4.4 billion each year for apparel, $3.7 billion for toys, $2.5 billion for footwear and $1.6 billion for household appliances.
“These additional tariffs will only threaten U.S. jobs and raise costs for American families on everyday goods,” said David French, senior vice president of government relations at the NRF. They will also hit hardest on lower-income households, who spend a much larger percentage of their income on these staples, he said.
“Tariffs are a very regressive form of taxation,” he said. “The supply chain will try to absorb as much of the blow as they can, then they will move those costs forward to consumers.”
In preparation, retailers are stocking up on merchandise.
Imports at the nation’s major container ports are near record high levels this summer, according to the NRF’s monthly Global Port Tracker report.
However, French said, “you can only have so much inventory.” It’s more likely that consumers will end up shouldering most, if not all, of the added costs, he added.
When tariffs were imposed on imported washing machines last year, U.S. manufacturers responded to reduced competition from imports by raising their prices, and as a result, more than the full amount of the tariff was passed on in the way of higher prices.
“U.S. consumers paid 125% to 225% more,” French said, referring to a working paper co-authored by Ali Hortacsu and Felix Tintelnot of the University of Chicago and Federal Reserve Board economist Aaron Flaaen.
In all, the Federal Reserve Bank of New York and researchers at Princeton and Columbia universities conservatively estimated that U.S. tariffs cost American consumers at least $6.9 billion last year.
A separate report from Oxford Economics estimated that tariffs could cost every American household about $800.
Buy what you can now, then buy less
To get ahead of the next waves of tariffs, Russ recommends buying some items now, if possible — such as cellphones or laptop computers — rather than holding off until later in the year. Even Christmas lights and decorations, which are mostly imported from China, will be costlier ahead of the holiday season.
“It’s just getting more expensive,” added Michael Bonebright, a senior blog editor at comparison shopping site DealNews.
For example, “I would immediately buy a smartphone rather than wait until Black Friday,” he said. (The price for an iPhone XS would rise to $1,142, up from $1,000, with a 25% tariff on China imports, J.P. Morgan said in a note to clients, although another top analyst predicted Apple will absorb most of the additional costs and keep prices unchanged.)
Bonebright also recommends stocking up on whatever is on sale now, from frozen food to footwear. “Shop as far ahead of time as possible.”
And further, scale back, he advised. “We are not in a recession, but if we start shopping like we are, we will be less effected.”
As for buying holiday presents this year, “look to give gifts that are intangible,” Bonebright said.