Who really loses in the tariff war

May 30, 2019, 18:53 UTC

By Erik Sherman

As clashes continue between Washington and Beijing, some sectors of the US economy have been hit harder than others. But with the threat of additional tariffs on Chinese imports of $ 325 billion, a wider range of industries in the United States will begin to suffer, as will consumers.

Tariffs in the ongoing trade war with China have already claimed victims. Among them are customers of Marker Construction, a homebuilding company based in Fort Lauderdale, Florida.

"We have seen a price increase of at least 15% with everything related to steel," said company president Peggy Marker at NBC News. The increase in the price of nails, screws, structural steel and reinforcing rods is now being passed on to its commercial customers, raising the project costs by several hundred thousand dollars.

"They have to estimate with the worst case scenario and then wait and see what happens," said Marker. "Now that an agreement with Mexico and Canada is under consideration, it could also help calm the market," she added, citing the recent agreement between the United States and its neighbors to remove tariffs on imported aluminum and steel.

As part of its "America First" policy, President Donald Trump said he would protect US metallurgical industries – but these promises seem to have collapsed. Domestic steel and aluminum manufacturers saw a short-term improvement in their revenues, but the relatively small number of jobs created by this industry was largely offset by the slowdown in construction, manufacturing and manufacturing firms. others prices and reduced availability had a negative impact.

"The price peaked in July or August of last year, since then it has been falling since then and reached a plateau two or three months ago," said Stephen Schober, President and Chief Executive Officer. Metal Supermarkets, supplier of small quantities of metals to local manufacturers. amateurs, maintenance operations and municipal worksites.

Meanwhile, farmers are facing a darker future. China has reportedly suspended all of its US soybean purchases, Bloomberg reported on Thursday.

"Soybeans are our main export to China," said Dan North, chief economist at Euler Hermes USA. Deliveries have "practically gone to zero a few months ago" and prices have now reached their lowest level in 11 years.

"The removal of these tariffs will certainly be an advantage, but I would not expect a return to the high level from the start," said North.

Farmers are the biggest losers in the tariff war – and they may never be fully restored, even with the special subsidies in place. "Agricultural contracts are long-term contracts," said Hamid Mohtadi, professor of economics at the University of Wisconsin in Milwaukee. When China imposed retaliatory tariffs on soybeans, buyers turned to Brazil, another major producer of the crop.

"In the best case, it may take years to renegotiate contracts," said Mohtadi. "Other agricultural products will not be much better off." And China is now even less likely to put all its eggs in the same basket as it did before with the United States.

So far, the problems have remained largely ignored by consumers, with the real pressure being placed on intermediate products rather than consumer goods. Prices have not increased enough for end-users, companies having absorbed increases.

The fourth tranche of tariffs on Chinese products could change all that. Next round products include the main categories in which imports play a significant role in consumer spending.

"You have to watch [the impact] in terms of imports, "said Tom Runiewicz, associate director at IHS Markit, a commercial information provider." Computers and electronics account for nearly $ 190 billion. That's about 34% of what we consume in computers and electronics. "28% of other electrical equipment comes from China.

About 45% of clothing and textile sales in the United States are imported from China. The same goes for a quarter of all furniture sold. "All the products you buy from Target, Walmart, probably even Ikea, come mostly from these cheap products," Runiewicz said.

The retail sector has not hesitated to quantify the costs to consumers. Nike and Adidas were part of a group of 173 shoe companies that signed an open letter stating that the proposed price increase on shoes "will result in additional costs of $ 7 billion for our customers, each year".

Walmart, Home Depot and Macy's also discussed the impact of rates on their bottom line. Earlier this month, Walmart said higher prices would drive up prices for consumers, even though the company was working to relieve pain by working with different suppliers and countries.

Home Depot announced last week that it had already seen its tariff increase by $ 1 billion and that the new increases would increase an additional $ 1 billion in annual production costs. It remains to be seen if this will happen.