By William Mauldin and Vivian Salama
WASHINGTON -- President Trump moved Thursday to extend tariffs
to essentially all Chinese imports, escalating a trade conflict
that is now poised to hit U.S. consumers in the pocketbook.
The new tariffs would take effect Sept. 1 and cover $300 billion
in Chinese goods -- including smartphones, apparel, toys and other
consumer products. They would come on top of tariffs already
imposed on $250 billion in imports from China.
"If they don't want to trade with us anymore, that would be fine
with me, " Mr. Trump told reporters of the Chinese. "Until such
time as there is a deal, we'll be taxing them."
Wall Street was rattled by the news, with stocks falling sharply
and erasing earlier gains as hopes slip for an end to the yearlong
trade dispute.
The U.S. action could also prompt fresh retaliatory measures
from Beijing, although there is also the possibility Mr. Trump
could withdraw his threat before the new levies go into force.
Mr. Trump announced plans to impose tariffs in a series of
tweets that followed a briefing from his trade team on this week's
negotiations in Shanghai. Those talks ended with neither side
detailing significant progress toward resolving the more than
yearlong dispute.
Mr. Trump said that senior officials still planned to resume
high-level discussions as scheduled next month, and expressed his
interest in reaching "a comprehensive Trade Deal" with China.
But Mr. Trump chided President Xi Jinping for not following
through on what the Trump administration views as prior
commitments. "China agreed to...buy agricultural products from the
U.S. in large quantities, but did not do so," he said.
"Additionally, my friend President Xi said that he would stop the
sale of Fentanyl to the United States -- this never happened, and
many Americans continue to die."
A spokesperson for the Chinese embassy in Washington didn't
immediately respond to a request for comment.
Business groups criticized the plans, especially at a time when
the likelihood of a near-term trade deal between Washington and
Beijing is falling.
"Tariffs are not the answer, escalation is not the answer," said
Myron Brilliant, head of international affairs at the U.S. Chamber
of Commerce in Washington. "We have to be careful about actions
undertaken by either government that would stir the pot and not
create the best atmosphere for getting these complicated talks back
on track."
The tariffs, essentially a tax paid by importers in the U.S.,
affect practically all the groups of products not hit previously,
with the exception of select categories, such as medicines.
Unlike previous rounds of tariffs, which have focused largely on
industrial goods, the $300 billion tranche is set to include a host
of consumer products, from electronics and cellphones to
apparel.
The tariffs would affect about $45 billion in cellphones, $39
billion in laptops and tablets, and $5.4 billion in videogame
consoles, according to the Consumer Technology Association, a trade
group.
The tariff plans threaten to undermine U.S. sales of iPhone and
other Apple products, which are largely produced in China. Apple
would either have to eat the tariff costs on iPhones -- which
analysts have estimated would be about $40 on the import price of
XS models -- or pass those costs on to customers.
Apple's business in China also faces risks from potential
Chinese retaliation, trade experts and analysts say. The company,
which has relied on China, Hong Kong and Taiwan for about a fifth
of sales, would be a potential target for China because it had a
nearly 6% share of the Chinese smartphone market in the June
quarter.
Shares of Apple were down about 2% Thursday, erasing a 2% surge
on Wednesday after the company reported it returned to sales growth
in the three month period ended June 29.
Dow Jones & Co., publisher of The Wall Street Journal, has a
commercial agreement to supply news through Apple services.
The toy industry, which sources about 85% of products from
China, has been bracing for the tariffs, including moving
manufacturing to places like Vietnam, Indonesia and Mexico and
importing the goods into the U.S. sooner.
Hasbro Inc. has notified retailers that it plans to raise prices
on any toys hit by tariffs and it also expects that retailers will
take ownership of inventory in the U.S. instead of China, which
will add to the toy maker's shipping and warehousing costs,
according to Chief Financial Officer Deborah Thomas.
Like Hasbro, Mattel, which makes Barbie dolls and Hot Wheels
cars, is looking to reduce its manufacturing footprint in China.
"We have put together a contingency plan and are working closer
with retailers to make sure we mitigate the impact," Mattel CEO
Ynon Kreiz said in an interview last month. "There are different
levers we can pull," he said, including using manufacturers and
vendors in other countries.
Toy makers may struggle to raise prices on toys sold during the
key holiday season since they have already set prices with
retailers, says Steve Pasierb, president of the Toy Association, an
industry trade group, meaning that the tariffs will hit the
manufacturers' profits. A larger concern is that as prices rise for
other consumer goods hit by tariffs, consumers may think twice
about spending as much on discretionary purchases like toys.
"It's a big concern because holiday spending power is important
as we finish the year," Mr. Pasierb said.
The tariffs plan is the latest move by Mr. Trump to put pressure
on the Chinese side in hopes of winning concessions to help
American businesses and farmers. Previous warnings of additional
tariffs have often been postponed, but three rounds eventually took
effect. Economists say the trade conflict is souring investment and
hurting economic growth in both companies.
Many Republican and Democratic lawmakers have backed Mr. Trump's
strategy of confronting Beijing as a necessary step to achieve
structural changes in the Chinese economy.
"Tariffs aren't the only solution President Trump should use to
pressure China, but China isn't making any friends in Congress with
its behavior, " said Sen. Chuck Grassley (R., Iowa), the Chairman
of the Senate Finance Committee, in a tweet. "China has a
responsibility to follow through on its commitments on fentanyl +
ag purchases + trade talks."
Yet the latest round of tariffs, if imposed, are likely to
generate more complaints from consumers and voters. One Democratic
presidential candidate, Rep. Tulsi Gabbard of Hawaii, said in the
primary debate on Wednesday that she would remove the tariffs if
elected.
The Trump administration appears to be aiming to alleviate
consumer and business concerns by starting with tariffs of only
10%, a move that also allows U.S. officials room to raise the
tariff level in the future if China doesn't follow through with
concessions.
At the same time, American farmers have increasingly suffered
from retaliation from China and other countries where the Trump
administration has penalized trade. Farm products are also facing a
disadvantage in Japan, which has opened its markets to other
countries through the Trans-Pacific Partnership, a deal Mr. Trump
withdrew from.
After meeting Chinese President Xi Jinping in Osaka, Japan, in
June, Mr. Trump and administration officials said they had won
commitments from Beijing to purchase more U.S. agricultural
products. The administration is also seeking a quick trade
agreement with Japan focused on agriculture.
But Beijing hasn't said that it committed to the purchases, and
Chinese firms have made only limited purchases of agricultural
commodities in recent weeks.
After the same meeting with Mr. Xi, Mr. Trump said his
administration would take a softer approach on Chinese
telecommunications giant Huawei Technologies Co., allowing firms to
do business with the blacklisted company if it doesn't trigger
security concerns.
So far the Trump administration hasn't formalized licenses for
U.S. firms to sell semiconductor chips and other products to
Huawei. Administration officials are looking at a plan that would
allow chip companies to sell to Huawei consumer products, such as
cellphones, but not sell advanced chips to the company's
telecommunications infrastructure, which many U.S. officials view
as a national-security threat.
--Andrew Restuccia contributed to this article.
Write to William Mauldin at william.mauldin@wsj.com and Vivian
Salama at vivian.salama@wsj.com
(END) Dow Jones Newswires
August 01, 2019 17:13 ET (21:13 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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