WASHINGTON — Consumers and businesses in Texas and beyond are poised to feel the pinch of President Donald Trump’s latest trade escalation with China, thanks to increased prices on thousands of goods ranging from auto parts to ball caps to Christmas decorations.
That pocketbook pain would come after Trump on Friday fulfilled his threat to raise tariffs to 25 percent from 10 percent on $200 billion of Chinese imports to the U.S.
The President took the drastic action after he said China reneged on key parts of a trade deal that appeared close to completion just a week ago. Trade talks are slated to continue between the world’s two largest economies, meaning there’s still a chance the tariff ante is short-lived.
But if the increased levies take hold, buyers should beware on upcoming shopping trips.
“The ‘25’ really is the point where you have to look at your product and say, ‘Can we even sell this anymore?’ ” said Drew Bowers, spokesman for Fort Worth, Texas-based Samsill, which makes goods like padfolios and binders. “At some point ... the consumer is just going to say, ‘No.’ ”
Trump often describes his tariffs as costs carried by China or other countries tussling with the U.S. on trade. But that’s not true.
Just ask Samsill. Or Igloo, the iconic cooler manufacturer. Or Feizy Rugs, a Dallas-based importer. Or Flying Circle Bags, based in Boerne, Texas, known for its backpacks. Or myriad other companies who require imports hit by Trump’s duties.
Tariffs are taxes borne by U.S. businesses, which are then forced to choose between absorbing that hit, tackling the costly task of reworking supply lines or passing on the burden to customers.
Though Trump has sought to shield consumers from the brunt of his global trade war — which has dinged many manufacturers, while also causing farmers harm via retaliatory tariffs — economic studies and government data show that many wallets are already lighter.
Americans took on $69 billion in added costs because of the tariffs Trump imposed last year, according to a recent study by four experts, including the World Bank’s top economist.
An increase to a 25 percent tariff on such a wide swath of Chinese goods would intensify the impact, particularly in trade-heavy states, and Trump has threatened to go even further by expanding tariffs to the $325 billion in Chinese imports that aren’t currently covered by levies.
That kind of jolt could produce serious ripple effects, grabbing the attention of everyone from retail giants like Walmart to mom-and-pop operations like the Luggage Shop of Lubbock, Texas.
“I don’t know how to prepare for this,” said Tiffany Williams, owner of the luggage store, where sales already slowed enough in the wake of just the 10 percent tariffs imposed in September that she wasn’t able to hire an extra worker over the holidays as she normally does.
Trump’s latest trade escalation, which is expected to draw retaliation from China, befits a President who describes himself as a “tariff man.”
The President has put duties on washing machines and solar panels from all over the world. He’s done the same with steel and aluminum imports, even from key trading partners like Canada and Mexico. And he’s slapped tariffs on about $250 billion in goods imported from China.
Trump says the import levies are a critical tool to bring trading partners to the negotiating table and, eventually, secure deals that benefit American businesses and workers. He’s been further emboldened by the fact that the U.S. economy has charged ahead amid his aggressive use of tariffs.
“Tariffs will make our Country MUCH STRONGER, not weaker,” Trump wrote on Twitter Friday morning.
“Tariffs will bring in FAR MORE wealth to our Country than even a phenomenal deal of the traditional kind. Also, much easier & quicker to do,” he wrote in another social media missive.
“We have lost 500 Billion Dollars a year, for many years, on Crazy Trade with China. NO MORE!” he wrote in still another, inaccurately describing the effects of the U.S.’s trade deficit with China.
Trump isn’t alone in these feelings, either.
The steel industry, especially in key Midwestern states, has earned the most attention for how it’s benefited from the president’s metal tariffs. But some businesses in Texas have also urged Trump to hold the line in his trade battles, particularly with China.
Klaus Bollmann is CEO of Georgetown, Texas-based Ringdale, which makes LED light fixtures.
He told the office of the U.S. Trade Representative that he would welcome a 400 percent — or even a 1,000 percent — tariff on all light products brought to the U.S. from China, explaining that “for the last 10 years, China has hurt our industry and our company severely.”
Even some business owners wary of Trump’s tariffs agree the President is on to something.
Take Pam Schenk, who owns Aunt Pam’s Closet, a quilt shop in Henrietta, Texas. She has no doubt that a 25 percent tariff on the imported Chinese fabric she sells will have an impact on her bottom line, though she’s survived unscathed the duties at the 10 percent level.
But she also collects old sewing notions, and that assortment of buttons and other accessories makes plain that “tons of things that were once made in the United States are no longer made here.” So if Trump’s tariffs help domestic manufacturers, then maybe it’s worth it, she said.
“You’ve got to hope that in the long run it’s going to be a good thing for our country,” Schenk said.
Indeed, few experts dispute the need to challenge China over unfair trading practices. But the question is in what manner and at what cost? Even as the worst doom-and-gloom predictions over Trump’s tariffs so far haven’t materialized, many experts insist the risks are all too real.
“There are a lot of threats out there to the Texas and American economy,” said Sen. John Cornyn, a Texas Republican who likened the tariffs employed by Trump to an “unguided missile.” “Trade wars would be on that list.”
While Cornyn and other GOPers in Congress have done little legislatively to rein in Trump on trade, they’ve urged their fellow Republican to cut a deal with China and other trading partners.
Trump’s latest move could prove to be a tipping point, as many Texas businesses have warned that a 25 percent levy on the $200 billion in Chinese goods could be cataclysmic.
Igloo, headquartered in Katy, Texas, said a tariff at that level would cost it $4 million a year.
At Fort Worth-based Samsill — the maker of padfolios and other office products — Bowers said the company decided to absorb the cost of the 10 percent duty imposed in September on the items it imports from China. The choice hurt, but the hope was that the tariffs would eventually go away, he said.
With the tariff rate increasing instead, it’s now unclear how the math will work out.
What is undeniable is that consumers often pay the bill for tariffs.
Washing machines offer the most obvious example. The President in January 2018 OK’d levies on imports of that laundry equipment from across the globe. Consumer prices for the machines spiked almost immediately after years of declines, according to the U.S. Labor Department.
Americans are left paying an extra $1.5 billion a year — about $90 more per appliance — due to Trump’s levy, per research by the University of Chicago and the Federal Reserve Board.
Average shoppers may or may not pick up on that kind of increase, whether it’s washing machines or other consumer goods. But the data is clear: prices have started to creep up on bicycles, pet supplies, sewing goods and other products already hit by the 10 percent tariff on Chinese imports.
As for the new 25 percent levies? The Trade Partnership, which is working to fight the tariffs, estimates that Trump’s escalation would cost the average U.S. family of four $767 a year.
At the Luggage Shop of Lubbock, Williams already noticed customers balking at the $400 bag that had to be marked up to $440 due to a 10 percent tariff. She worries what it will mean for business if that same bag now costs $500 due to the new 25 percent level.
“We, as a store, don’t really have an option of eating the price,” she said. “I guess we just have to figure out where else we can cut costs.”