iPhones, Nike sneakers and toys could all get more expensive after Trump imposes tariffs on China

Posted at 8:50 AM, May 10, 2019

iPhones. L.O.L. Surprise dolls. Nikes.

They could all get more expensive after President Donald Trump followed through on his threat to expand tariffs on Chinese imports to include an additional $325 billion in goods left out last year.

The administration is already moving ahead with plans to hike existing tariffs starting Friday on industrial components and other goods, from 10% to 25% — a warning shot to Beijing amid ongoing negotiations toward a comprehensive trade agreement.

Most consumer electronics, toys and shoes have so far been shielded, a strategic move that made the trade war almost invisible to American shoppers.

But Trump is running out of goods to tax, and the expanded tariffs he threatened over the weekend could result in a 25% tax on almost everything else the US imports from China.

That would hit 100% of the toys and sports equipment imported from China to the United States, as well as 93% of the footwear and 91% of textiles and clothing, according to an analysis by the Peterson Institute for International Economics.

"These goods were deliberately set aside before because they would be painful for us," said Phil Levy, a senior fellow at the Chicago Council on Global Affairs who served as a senior economist for trade under President George W. Bush.

The renewed threat has toy companies big and small worried that they will have to raise prices, dragging down sales this holiday season.

About three-quarters of the toys sold in the United States are made in China, including the top-selling L.O.L. Surprise dolls, said Toy Association President Stephen Pasierb.

"We're in a low-margin, price sensitive business. If the price goes up by 25% on a $10 toy, people aren't going to buy them," he said.

A long list of consumer electronics could also end up being hit by new tariffs, including smartphones, computers, televisions, fitness trackers, Bluetooth wireless headsets and even drones, according to Sage Chandler, vice president of international trade at the Consumer Technology Association, a major industry trade group.

Apple, which assembles its iPhones in China, declined to comment for this story. But the company triggered a market selloff earlier this year when it warned investors that the trade war has dampened demand for iPhones in China.

Moody's Analytics predicts that the tariff rate hike and new tariffs would slow GDP growth in China by 1.2 percentage points. It also predicts a slowdown in US GDP and an increase in the unemployment rate if both are imposed.

Trump has repeatedly claimed that China pays the tariffs. And while some Chinese companies may choose to eat some of the cost in order to remain competitive in the US market, several recent research papers show that American consumers and producers take on most of the burden .

The president's threat to put tariffs on more Chinese goods is not new. He said additional taxes were "ready to go on short notice" last September.

Industry groups have been trying to persuade the Trump administration to drop further tariffs for months.

The Consumer Technology Association and its members raised concerns over trade policy with the White House and Congress as recently as last week, when a number of the group's member CEOs visited Washington.

Still, many policy analysts continue to believe the Trump administration's tariff threats are more of a bargaining tactic than a sign of a breakdown.

"I don't think we're at the point where people think the talks are completely dead," said Rob Atkinson, president of the Information Technology and Innovation Foundation. "People aren't there yet. They're more of the view that this is a method by which you'd force the Chinese to give more than they've given."

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