Chick-fil-A sandwiches, refrigerators, and batteries: Business groups warn that Trump's trade war with China will drive up costs for American consumers

  • President Donald Trump imposed a 25% tariff on more than $34 billion worth of Chinese exports to the US on Friday.
  • The tariffs mostly apply to machinery and industrial goods.
  • But industry groups warn that American consumers will still pay the price — because US manufacturers will pass on increased costs to customers.

President Donald Trump argues new tariffs on Chinese goods are designed to protect US businesses and force China to change its economic policy. But many consumer industry groups say American consumers will likely bear the brunt of the fight.

While less than 1% of the goods that will be subject to Trump's tariffs are consumer goods, Trump's list of products subject to new tariffs includes machinery that does everything from cutting metal, to measuring electrical currents, to incubating chickens. US businesses rely on these products to make their own goods, which are eventually sold to US consumers.

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Impact of trade tensions between US and China
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Impact of trade tensions between US and China

Head chef Liang Xin poses with a piece of beef imported from the U.S. in the kitchen at Wolfgang's, a high-end steak house in East Beijing's Sanlitun district, China, April 6, 2018. Liang said U.S. beef has always been limited in China, so he doesn't know how customers would react if the restaurant has to raise prices.

(REUTERS/Thomas Peter)

Liu Anqi rolls dough in flour made from imported grain at the baking studio she runs with friends, in Beijing, China, April 12, 2018. Liu has just opened a bakery in Beijing with her friend. She also teaches customers how to make cakes with a brand of flour that uses only wheat from the United States and Canada. "Flour is one of the most important ingredients in baking and its quality varies with different brands," Liu said, adding that finding a new brand would be time-consuming and higher taxes on this wheat would force her to raise cake prices and tuition fees, which could turn customers away. 

(REUTERS/Thomas Peter)

A detail of the Harley-Davidson brand name is photographed on the motorcycle of Guo Qingshan in his village outside Beijing, China, April 7, 2018. "I love the sound of the engine and the muscle of the motor. When I ride it, I feel free and proud," Guo said. However, Guo has his limits. If prices rise, Guo said he wouldn't contemplate buying another Harley. 

(REUTERS/Thomas Peter)

Fried vegetables are seen in the kitchen of the restaurant where chef Liu Ming works, in Beijing, China, April 11, 2018. Liu said the oil that his restaurant uses is produced with soybeans imported from the United States, and the business won't change the brand even if prices rise. "We use this oil because it gives the food a bright colour and does not leave a strange smell or taste," he said. "We don't know what will happen to our dishes if we change the oil."

(REUTERS/Thomas Peter)

Xie Guoqiang, who runs the Vin Place wine and liquors store, poses for a photograph inside the shop in Beijing, China, April 10, 2018. Xie said in an interview that the tariffs would have little impact on his business, as the shop mostly imports wine and liquors from France, Chile, Austria and Argentina.

(REUTERS/Damir Sagolj)

A bottle of Jack Daniel's Tennessee whiskey is seen on a shelf at the Vin Place wine and liquors store in Beijing, China April 10, 2018. Xie Guoqiang, who runs Vin Place, said in an interview that the tariffs would have little impact on his business, as the shop mostly imports wine and liquors from France, Chile, Austria and Argentina.

(REUTERS/Damir Sagolj)

Liu Ming, a chef at a Sichuan restaurant in Beijing, poses for a picture at the back door of the kitchen where he works in Beijing, China, April 11, 2018. Liu said the oil that his restaurant uses is produced with soybeans imported from the United States, and the business won't change the brand even if prices rise. "We use this oil because it gives the food a bright colour and does not leave a strange smell or taste," he said. "We don't know what will happen to our dishes if we change the oil." 

(REUTERS/Thomas Peter)

Liu Anqi uses flour made from imported grain at the baking studio she runs with friends, in Beijing, China, April 12, 2018. Liu has just opened a bakery in Beijing with her friend. She also teaches customers how to make cakes with a brand of flour that uses only wheat from the United States and Canada. "Flour is one of the most important ingredients in baking and its quality varies with different brands," Liu said, adding that finding a new brand would be time-consuming and higher taxes on this wheat would force her to raise cake prices and tuition fees, which could turn customers away. 

(REUTERS/Thomas Peter)

A bottle of oil is seen in the kitchen of the restaurant where chef Liu Ming works, in Beijing, China, April 11, 2018. Liu said the oil that his restaurant uses is produced with soybeans imported from the United States, and the business won't change the brand even if prices rise. "We use this oil because it gives the food a bright colour and does not leave a strange smell or taste," he said. "We don't know what will happen to our dishes if we change the oil." 

(REUTERS/Thomas Peter)

Zang Yi poses for a picture as her Tesla car is charging at a charging point in Beijing, China, April 13, 2018. Zang said if the trade tensions resulted in pricier U.S. imports, she wouldn't consider American brands when the time comes to buy a new car. "With the tariff, I would have to pay tax of 100,000 yuan to 200,000 yuan if I were to buy a new Tesla," she said. 

(REUTERS/Thomas Peter)

Zang Yi charges her Tesla car at a charging point in Beijing, China, April 13, 2018. Zang said if the trade tensions resulted in pricier U.S. imports, she wouldn't consider American brands when the time comes to buy a new car. "With the tariff, I would have to pay tax of 100,000 yuan to 200,000 yuan if I were to buy a new Tesla," she said. 

(REUTERS/Thomas Peter)

A Chinese woman tastes wine during a wine seminar in Beijing, China, April 14, 2018.

(REUTERS/Thomas Peter)

Shan Yuliang, salesperson at a cigarette and wine shop, poses with a carton of Marlboro cigarettes in Beijing, China, April 8, 2018. "The moment I saw the news about the trade war on the internet, I felt something big was coming. Previously I would not think about what brand to buy. Now I will give it a second thought and avoid buying American products to defend my country," Shan said. 

(REUTERS/Thomas Peter)

Wine tasting teacher Li Yangang poses for a picture during a wine seminar in Beijing, China, April 14, 2018. Li said in an interview that reduced sales of American wine in China would not hurt the local market because of its relatively small market share. "Australian wine and French wine would have a bigger impact," he said. 

(REUTERS/Thomas Peter)

Cartons of Marlboro cigarettes are seen stacked up on a shelf between Chinese cigarettes at a cigarette and wine shop in Beijing, China, April 8, 2018. 

(REUTERS/Thomas Peter)

Student He Bingzhang lights a Marlboro cigarette in Beijing, China, April 8, 2018. "I don't think the trade war would change my behaviour. I don't smoke a lot, probably one pack a month. Even if it costs 100 yuan, I would still buy Marlboro because it is affordable," He said. 

(REUTERS/Thomas Peter)

Student He Bingzhang poses for a picture as he smokes a Marlboro cigarette in Beijing, China, April 8, 2018. "I don't think the trade war would change my behaviour. I don't smoke a lot, probably one pack a month. Even if it costs 100 yuan, I would still buy Marlboro because it is affordable," He said. 

(REUTERS/Thomas Peter)

Guo Qingshan poses on his Harley-Davidson motorcycle in his village outside Beijing, China, April 7, 2018. "I love the sound of the engine and the muscle of the motor. When I ride it, I feel free and proud," Guo said. However, Guo has his limits. If prices rise, Guo said he wouldn't contemplate buying another Harley. 

(REUTERS/Thomas Peter)

Beef imported from the U.S. is seen at Wolfgang's, a high-end steak house in East Beijing's Sanlitun district, China, April 6, 2018. A 15-kg whole cut of beef from the United States is around 20 percent more expensive than its Australian counterpart, said Daniel Sui, deputy general manager at Wolfgang's. "Customers like U.S. beef because it tastes juicy and tender, but Wolfgang's only sells around seven to eight pieces of U.S. imported beef steak each day," Sui said. "The limited supply is because the Chinese government bans feed additives and only 5 percent of U.S. beef is qualified for export." 

(REUTERS/Thomas Peter)

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More expensive equipment and parts means that US businesses will see costs rise. In turn, those businesses can pass on the increased costs to consumers or shrink costs in other areas — for instance by laying off workers. According to most experts, businesses will likely use some combination of these two options.

So while the tariffs may not result in an immediate price hike at the checkout line, many industry groups warned that Americans will still see changes.

  • The National Retail Federation: "With tariffs against China taking effect, American consumers are one step closer to feeling the full effects of a trade war," Matthew Shay, president and CEO of The National Retail Federation, said in a statement Friday. "These tariffs will do nothing to protect US jobs, but they will undermine the benefits of tax reform and drive up prices for a wide range of products as diverse as tool sets, batteries, remote controls, flash drives and thermostats."
  • Consumer Technology Association: "While President Trump says his trade policy is meant to punish China, the numbers show that, in reality, U.S. businesses, workers and consumers will pay the price under this policy," said Sage Chandler, the group's vice president for international trade. "Of the original $50 billion in tariffs on China, items including lithium batteries, navigation devices, disk drives and circuit board components will be affected – hitting $15.2 billion worth of Chinese imports."
  • The North American Food Equipment Manufacturers: The tariffs could even trickle down to the cost of fast food, Charlie Souhrada, a vice president of the North American Food Equipment Manufacturers, told The Associated Press. While Trump's duties do not apply to food products, Souhrada pointed that NAFEM member Henny Penny expects the tariffs to increase the price of their pressure cookers. Those devices are in turn used by chains like Chick-fil-A to make their food.
  • National Association for Manufacturers: "Tariffs will bring retaliation and possibly more tariffs," said Jay Timmons, president and CEO of NAM. "No one wins in a trade war, and it is America's manufacturing workers and working families who will bear the brunt of continued tariffs. Manufacturers in the United States succeed when the rules are clear and fair and markets are open."

While Friday's tariffs will likely hit consumers eventually, Trump's threat to impose tariffs on another $200 billion worth of Chinese exports to the US would likely result in more direct pain for consumers.

Not just consumers facing pain

While US consumers may eventually see higher prices on shelves, there's also a second negative trickle-down effect. Many businesses count China as a major export destination, but the retaliatory tariffs placed by the Chinese government on US products will similarly increase prices in China and hurt sales.

For instance, China's 25% retaliatory duty on whiskey could harm the US producers, according to the Distilled Spirits Council.

"Imposing 25% tariffs on US whiskeys could put the brakes on an American export success story,” Christine LoCascio, senior vice president for international trade at the Council, said in a statement. “American spirits exports to China have grown by almost 1,200%, from $959,000 in 2001 to $12.8 million in 2017."

Distillers are worried that retaliatory tariffs, not only from China but Europe and Canada as well, could stunt their sales and slow expansion and hiring plans.

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