Here’s the latest for Friday July 6th: US, China enact trade tariffs; EPA Administrator Scott Pruitt resigns. Secretary of State Pompeo in North Korea; Thailand Navy Seal Commander says time is limited for cave rescue.
President Donald Trump’s tariffs on $34 billion in Chinese goods took effect Friday, setting the stage for potential price increases on those products for American companies and consumers.
A tariff is essentially a tax on an imported good. Companies affected by tariffs can respond by absorbing the extra expense, increasing prices, moving production to other countries or some combination of the three.
While the direct impact on consumer goods appears to be limited for now, Trump’s 25 percent tariffs on Chinese goods will hit products sold to certain American manufacturers, medical device makers and farmers, among others.
China’s immediate blow-for-blow retaliation signaled that the trade dispute could quickly escalate into a full-blown trade war if negotiators can’t reach an agreement on concessions.
“Prices would likely rise in the near term as tariffs increase the cost of imports, and some firms would be forced to pass rising costs along to consumers or shutter,” Wells Fargo investment strategy analyst Peter Donisanu wrote Friday in a note to investors.
Trump says China’s trade policies give its companies an unfair advantage in the global marketplace. China says the U.S. tariffs are irresponsible but has offered to buy more U.S. goods in response.
For Chinese consumers, prices of American goods could spike after China applied tariffs on U.S. items such as pork and soybeans. If sales of those goods fall — or if China finds alternative sources at a cheaper price — American farmers will get pinched.
Taken together, the actions add to a growing list of global trade disputes. Trump has also dispatched emissaries to renegotiate the North American Free Trade Agreement and imposed tariffs on foreign steel and aluminum that recently triggered retaliatory tariffs from the European Union.
Key foreign imports affected by the American tariffs
Farming equipment: The American tariffs on Chinese goods affect various forms of farming machinery. Examples include poultry incubators and different types of dairy machines.
If those tariffs make it more expensive for American farmers to operate, it could theoretically translate into price increases. But farmers are already facing stiff competition that could force them to absorb any increases in machinery prices.
“While other sectors of the U.S. economy are surging, the farm economy is facing adversity from many angles such as low commodity prices and income, rising interest rates, record debt and poorer loan performance,” the U.S. Farm Bureau said in a recent statement. “One factor that will certainly help to improve the farm economy, and is in the best interest of U.S. agriculture, is a timely and successful resolution of these trade disagreements.”
Motor vehicles: Right now, there are only a few vehicles imported from China to the U.S. General Motors imports the Buick Envision crossover, for example.
GM spokeswoman Dayna Hart confirmed that the Envision is subject to Trump’s import tariffs. “At this point we are still assessing the impact of the tariffs and have no information to share about price increases,” Hart said in an email.
Another company that manufactures some vehicles in China and sells them to American customers is Volvo, a Swedish brand owned by Chinese automaker Geely. Volvo representatives were not available for comment Friday.
All things considered, American car prices would likely not be significantly impacted by Trump’s tariffs on China.
But Trump’s threat to impose up to 25 percent tariffs on European Union-made vehicles in retaliation to the EU’s long-standing 10 percent tariffs on American-made cars could lead to average vehicle price increases of about $5,000, according to LMC Automotive.
Volvo CEO Håkan Samuelsson told USA TODAY in an interview in June that he supports a policy of no tariffs on vehicles between the U.S. and China.
Elimination of auto tariffs would be “good for the industry and good for the U.S.,” Samuelsson said.
Health care equipment: Trump imposed tariffs on various forms of health care equipment from China, including CT scanners, EKGs and X-ray tubes.
While American health care providers may not be immediately affected, any increase in prices for their equipment could eventually translate into higher medical costs.
At Boston Scientific, for example, Chief Financial Officer Daniel J. Brennan told investors in April that “we do not manufacture in China, but we do purchase a small percentage of component inventory from China, so there may be slight pressure on our cost of goods sold if U.S. tariffs are applied to Chinese manufactured goods.”
Products made with steel or aluminum: Trump’s recent imposition of tariffs on foreign steel and aluminum triggered fears of rising costs on anything substantially made with the commodities.
Beer makers, for example, said their cans would cost more to make. And car companies warned that their expenses for manufacturing vehicles would increase.
Will those costs be passed along to consumers? That’s harder to assess.
When the EU imposed retaliatory tariffs on American motorcycles in response to Trump’s steel and aluminum tariffs, Milwaukee-based Harley-Davidson said it would cost an extra $2,200 per bike made in the U.S.
But instead of passing along the extra cost to European customers, Harley will absorb the hit and move some manufacturing abroad.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
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