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.
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.