The escalating tariffs on Chinese goods haven’t hit most consumers just yet, but that’s about to change.
Every American household — especially low- and middle-income families — could start feeling the pinch as early as January.
The Trump administration this year has issued three rounds of tariffs — each one followed by retaliatory tariffs on U.S.-made products by China. The tariffs are designed to punish China over alleged unfair trading practices.
The first couple of rounds didn’t target consumer goods, so most shoppers were immune. Building projects became more expensive, as tariffs jacked up the prices of lumber and steel, but the tug-of-war on trade didn’t make a dent in that Saturday afternoon run to the grocery store.
The latest tariffs, however, are hitting closer to home. Food, toilet paper, hats, backpacks, beauty care products, sporting goods, home improvement items and pet products are all included in $200 billion in Chinese imports subject to the 10 percent tariff the administration added in September. The rate is expected to rise to 25 percent in January.
The National Retail Federation estimates that a 25 percent tariff on furniture and travel goods alone would cost Americans an additional $6 billion a year.
“These tariffs definitely have an impact,” said Alex Boehnke, spokesman for the Ohio Council of Retail Merchants. “They are taxes that are ultimately going to be beared by the consumer, and that’s certainly detrimental for folks that have a tighter budget. It’s detrimental for the economy as a whole, and it’s certainly detrimental to the retailers themselves.”
To avoid the impacts for as long as possible, retailers made advanced orders when news of the tariffs surfaced, with many expediting the shipments before the extra charges took hold, Boehnke said.
“They made sure that at least in the near term, with the upcoming holiday season, that they would have their product in and be ready,” he said.
Some retail customers are already seeing higher prices on appliances, but Boehnke said the household impact will really be seen come January or February, when retailers have to restock shelves after the holiday shopping season.
“The fact is that in 2018, retailers have complex supply chains that have been in place and they’ve worked on building for years,” he said. “You can’t change those overnight and you can’t change them even over the course of a few years.”
Jobs at risk
The tariffs are especially troublesome for stores that cater to low- and middle-income customers such as Dollar Tree, which operates more than 15,000 stores nationwide under the Dollar Tree and Family Dollar brands.
More than 60 percent of Family Dollar customers have annual household incomes of less than $40,000 and half of those are less than $20,000, said Dollar Tree’s CEO Gary Philbin at a hearing before the U.S. trade representative in late August.
The tariffs impact around 10 percent of low-cost store’s products. Philbin said some of the items that “customers depend on to make ends meet” could not be produced for the price anywhere other than in China, forcing the company to pull those items from shelves or decrease package sizes to continue keeping all items under $1.
“Businesses are working on very thin margins these days and they don’t have the cushion to be able to eat that cost,” said Chris Kershner, executive vice president of the Dayton Area Chamber of Commerce. “They have to pass on those costs to the ultimate consumer.”
The earlier rounds of tariffs on building materials will also impact consumers, as retailers need those products for expansion, remodeling and development.
“Our 4,000 rural stores are often one of the best job opportunities in rural America,” Dollar Tree’s Philbin said. “We hire over 6,000 new retail associates nationwide every year. The proposed duties put these new jobs, and possibly existing jobs, at risk.”
Illinois based Cedar Electronics, which designs and manufactures products in West Chester, will also see an impact on all of its communication products — from CB radios for truck drivers to marine VHF safety radios, said Mark Karnes, the company’s vice president of strategic planning, at the hearing.
“Our concerns on the tariff include … the dramatic increases in our product costs that are making us less competitive with our foreign-based competition, the irony of which we compete against Korean and Japanese manufacturers in all of our major categories,” Karnes said. “And they are the only ones that are immune to the tariff.”
Kershner said consumers should remember to look at the bigger picture as costs could be higher or lower depending on where items are imported from.
“Know, as a consumer, that it’s not the businesses that are creating these increased costs,” he said. “The businesses are really the pass through.”
FIVE FAST READS