Tit-for-tat trade war now includes furniture

Tariff image-web

September 2018—

President Trump last month moved forward with his administration’s much-threatened decision to impose tariffs on an additional $200 billion in Chinese goods that includes furniture.

The new tariffs could drive up the cost of Chinese-made furniture and a range of other products ahead of the holiday shopping season, though it’s unclear how much.

In addition to furniture, boats, televisions, and copper are among the list of imports covered by the latest list of new tariffs. Also included on the list are metals used in the production of mattresses.

This addition brings tariffs to about half of all goods imported from China to the U.S. Tariffs increase the cost of goods to U.S. buyers, and lead to higher prices for the same items from domestic producers and imports from countries that have avoided tariffs.

The surcharge began at the end of September at 10 percent and will increase to 25 percent by the end of the year.

As has been the case in this tit for tat trade war, China hit back. Within 24 hours of the White House’s announcement, China imposed its own tariffs of up to 10 percent on an additional $60 billion in American goods, slapping higher border taxes on nearly all U.S. exports to China.

The White House’s announcement was not unexpected. A preliminary list of possible products first appeared in July. While furniture remained on the final list released Sept. 17, other products were spared including smartwatches, bicycle helmets, children’s playpens, some chemicals, and health and safety devices.

Trump said he imposed the latest tariffs to pressure China on business tactics that he said unfairly disadvantage American businesses. In announcing the new tariffs, Trump said the U.S. trade gap with China—the net between imported and exported goods between the two countries—was too large. “We can’t do that anymore.”

So far, economists have found no broad negative or positive effect from earlier tariffs imposed on China, and on aluminum and steel imports from several countries, but rather in select categories. For example, the price of washing machines in the U.S. increased 20 percent following U.S. tariffs on metal imports, and the prices for all appliances in general jumped 7 percent.

A government collects tariffs as a form of import tax. Tariffs can be effective in narrow cases to offset government subsidies that create cheap exports to the U.S. and others to boost economic growth, a practice sometimes called “dumping,” or to protect endangered domestic industries that have national or cultural importance. Canada, for instance, imposes high tariffs on some imported dairy products as part of price supports for its farmers. But tariffs are also used as a trade weapon, in which a country heavy on imports, like the U.S., attempts to use the surcharge to force policy changes that diplomacy has failed to reach.

Trump has tried to use tariffs to penalize several countries this year, including Mexico, Japan, Canada and members of the European Union, hoping the threat of driving up costs on their products will make them more open to his demands. The tactic has had mixed success.