THIS MORNING WE ARE ONCE AGAIN FOCUSED ON THE US-CHINA TRADE TENSIONS THEIR RIPPLE EFFECTS. WHAT IS THE LATEST OUT OF WASHINGTON?
More shots were fired in the trade war last week. On Thursday, President Trump took to Twitter to announce that he intends to impose a 10 percent tariff on the remaining $300 billion in Chinese imports that have been spared in the trade battle so far. These tariffs would go into effect on September 1, and when they do, the president will have imposed tariffs on all goods the US imports from China. But this round will be different.
For the most part, previous rounds of tariffs targeted industrial goods and raw materials used to manufacture final products. They were designed to put the squeeze on Chinese companies and pressure firms to move their supply chains out of China back to the US, all while avoiding too much pain for Americans by avoiding tariffs on consumer goods. But we are past that now. This new round of tariffs, if they do go into effect, will be on final products – goods that Americans buy off the shelves every day. Consumers can expect to feel the bite of this latest round of tariffs.
WHAT PRODUCTS WILL BE AFFECTED?
A wide range of consumer goods will be affected. Everything from consumer electronics to clothing and shoes to toys. Considering 42% of apparel, 70% of all shoes, and 85% of toys sold in the United States are made in China, consumers will certainly feel the pinch. And all of this comes on top of the financial pain the US-China trade war has already inflicted on American families. According to a report from the New York Federal Reserve, previous rounds of tariffs are costing the typical US household more than $1,200 a year. When Trump increased tariffs in May, it hit some consumer goods including luggage, bikes, handbags, hats and baseball gloves. The costs for consumers will rise steeply if this new round of duties does go into effect in a month.
IS IT JUST CONSUMERS WHO FEEL THE PINCH?
No. Businesses – from manufacturers to retailers – are all going to feel the effect of these tariffs as well. Rising prices on supplies mean higher product costs and higher product costs mean fewer sales. This is compounded by the fact that consumers now have less disposable income. In the broader economy, we have certainly seen the trade war take its toll in recent months. GDP growth has slowed in recent months, and manufacturing numbers have been flat.
HOW HAS THE TRADE WAR AFFECTED THE LABOR MARKET? WHAT DID LAST WEEK’S JOBS REPORT TELL US?
Despite increased trade tensions with China and a note of caution from the Federal Reserve, the labor market continues to be steady. Employers added 164,000 jobs in July, according to the Labor Department, continuing a record hiring streak that has kept the unemployment rate at or below 4% since last March. The report shows that the economy’s foundation remains strong, even as the President’s battle with China and a slowing global economy are causing some anxiety.
Mellody Hobson is President of Ariel Investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts. Additionally, she is a regular financial contributor and analyst for CBS News.