The Trump administration will delay until mid-December the 10 per cent tariff on some Chinese products on many holiday-shopping lists, with the president acknowledging that the levies would have hurt consumers.
By granting a grace period for everyday items like some phones and toys, the U.S. concession appears designed to avoid any disruption or additional price increases for American consumers heading into the final four months of the year -- from back-to-school purchases to Christmas shopping.
The announcement also came as the two sides spoke for the first time since the recent escalation in tensions. President Donald Trump said his administration had a “very productive” call with China and that he thinks Beijing wants to “do something dramatic” on trade.
“They really would like to make a deal,” Trump said Tuesday before boarding a helicopter in Morristown, New Jersey.
The levies were delayed “so it won’t be relevant to the Christmas shopping season,” the president added.
Stocks surged on the news Tuesday. Apple Inc. spiked as much as 5.8 per cent and Best Buy Co. climbed as much as 11 per cent on optimism that the reprieve would boost electronics sales in the holiday season. Apparel retailers including Gap Inc. and L Brands Inc. rose, as did toy maker Hasbro Inc. and discount chain Dollar Tree Inc.
The U.S. Trade Representative’s office said in a statement Tuesday that tariffs would be delayed until Dec. 15 for items such as mobile phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.
“What this means is that retailers will be able to get their shipments in without the 10 per cent tariff, which is a sigh of relief,” said Poonam Goyal, a retail analyst at Bloomberg Intelligence. “It definitely saves the holiday season.”
With the Sept. 1 deadline, there wasn’t time for retailers to speed up ordering for the holiday season because it often takes more than four weeks for inventory to come from China, Goyal said.
Not all retailers will escape the hit, however. A wide range of goods, from shoes and apparel to sporting goods, will still be subject to a tariff as of Sept. 1.
While some tariffs will take effect on Sept. 1 as planned, “certain products are being removed from the tariff list based on health, safety, national security and other factors,” the USTR also said.
About US$250 billion of Chinese goods have already been hit by 25 per cent duties.
David French, a spokesman for the National Retail Federation, said the organization was pleased by the delay on certain consumer goods but expressed caution.
“Continued uncertainty for U.S. businesses and consumers is a drag on the economy,” he said. “What we really need is an effective strategy to address China’s unfair trade practices by working with our allies instead of using unilateral tariffs that cost American jobs and hurt consumers.”
U.S-China Call
Chinese Vice Premier Liu He talked with USTR Robert Lighthizer and Treasury Secretary Steven Mnuchin by phone on Tuesday, according to a statement posted on the Ministry of Commerce website. Another conference call is planned again in two weeks.
The tariff announcement came shortly after Trump insisted again that his levies were not causing higher prices for American consumers and that China was bearing the cost of them. Economists and businesses have disputed that last point.
What Our Economists Say
“Speak to businesses and it’s the uncertainty -- not knowing if a tweet from President Donald Trump will break a crucial supply chain or block access to a market -- that’s weighing on investment and hiring decisions. A surprise delay to tariffs, and the creation of a new artificial deadline on Dec. 15, will do little to resolve it.”
Tom Orlik, Bloomberg Economics
Rick Helfenbein, president and CEO of the American Apparel & Footwear Association, called the tariffs -- even with a delay -- “a destructive plan.”
“Make no mistake, these tariffs, including the ones imposed in earlier tranches, are paid by U.S. companies. They create costs and uncertainty, forcing companies to delay or scuttle hiring and investment decisions and ultimately hit the U.S. consumer,” he said. “Rebalancing our trade partnership with China is of critical importance, but taxing U.S. companies, U.S. consumers, and the U.S. economy is not the way to achieve that goal.”
Economic Impact
The International Monetary Fund last month cited trade tensions as one of the biggest risks to the global economy as it downgraded its 2019 growth forecast, while Goldman Sachs has said there’s growing concerns that the trade war will trigger a U.S. recession. A Bloomberg News August survey of economists gave a 35 per cent probability of a recession in the next 12 months, up from 31 per cent previously.
Trump’s announcement about the new duties ended a tentative trade truce that he forged with Chinese President Xi Jinping at the end of June in Japan, just as the two sides were resuming negotiations. In the past week tensions have escalated further as the U.S. Treasury Department formally labeled China a currency manipulator.
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