The new tariffs that President Trump put on $200 billion worth of Chinese goods Monday will hit home in a place that may not sit well with American consumers: their holiday gift-giving budgets.
The new 10% tariffs will take effect on Sept. 24 and rise to 25% by the end of 2018. They add to $50 billion worth of Chinese goods facing tariffs imposed earlier this year. On Tuesday, China responded by announcing plans to slap duties on $60 billion in U.S. Exports. The White House has said it’s prepared to impose tariffs on another $267 billion in Chinese imports upon China’s retaliation.
The long list of Chinese goods facing tariffs—about half of all Chinese imports will now be subject to import taxes—includes many common holiday gifts such as toys, perfumes, TV sets, consumer electronics, pet treats and collars, kitchen gear, and winter wear like mittens and knit hats.
The tariffs also put retailers in a tough position. They will either need to eat the costs of the 10% tariffs and suffer lower margins or pass them on to consumers. Since retailers who post lower margins are routinely punished by investors with falling stock prices, the latter option is more likely.
“Every time this trade war escalates, the risk to U.S. Consumers grows. With these latest tariffs, many hardworking Americans will soon wonder why their shopping bills are higher and their budgets feel stretched,” said Matthew Shay, president and CEO, National Retail Federation. “We cannot afford further escalation, especially with the holiday shopping season right around the corner.”
One way U.S. Holiday shoppers can receive some early is by thinking like the retailers and shopping early. A Walmart official told the Wall Street Journal that “most large retailers already have landed most of their holiday goods by the first of October.” Tariffs are more likely to affect goods shipped in November or later, so try to get everything on your list before, even before the traditional, late-November sales events of Black Friday and Cyber Monday.
Savvy shoppers who want to avoid the 10% premiums that tariffs will place on their holiday gifts this year might consider some of the items that the Trump administration chose to exempt from tariffs, including smartwatches, fitness trackers, bike helmets, children playpens and Apple AirPods. Apple lobbied Trump to make many of its popular items remain tariff-free, and it seems to have worked—for now.
Beyond that, holiday shoppers may want to focus on shopping with large retailers who can warehouse products. Smaller retailers who haven’t stocked up early, may be be forced to pay a premium when they run out of inventory and are subjected to tariff pricing later. And the later they wait, the worse it could get for shoppers and sellers alike. The 25% rise in tariffs on Chinese goods will kick in at year’s end—by next spring, retailers both big and small will be passing those higher costs on to consumers.