President Donald Trump and his administration finally made the call to delay some products from the supposedly 10% tariffs on $300 billion worth of Chinese imports last Tuesday; noting that the decision will benefit American consumers, especially in the upcoming holiday season.
The White House delays latest tariffs on many popular Chinese items like cellphones, laptops, video game consoles, some toys, computer monitors, certain footwear, and clothing. Meanwhile, items not included in the list will proceed to take the added 10% tariffs by September 1.
However, they will only be postponed and the 10 percent tax would still go into effect on Dec. 15, effectively ensuring retailers can import goods for the holidays before the tariffs take effect.
The decision was obviously encouraged by the realization that the trade war between China is directly affecting American consumers despite President Trump’s insistence that the higher tariffs are helping the American economy.
“We are doing this for the Christmas season, just in case some of the tariffs would have an impact on U.S. consumers. So far they’ve had virtually none. The only impact has been that we’ve collected almost $60 billion from China, compliments of China. But just in case they might have an impact on people, what we’ve done is we’ve delayed it so they won’t be relevant for the Christmas shopping season,” Trump told reporters.
Up until recently, Trump has been neglecting economist concerns regarding the increasing tension that’s brewing from the US-China trade war and how it directly affects consumers.
However, industry groups said otherwise, indicating that higher tariffs will hurt businesses and the added costs for resources purchased from China will fall on consumers.
Based on the planned total costs from tariffs, a typical American family of four would pay about $350 more a year, according to the Tax Foundation. While inflation — a measure of rising costs — has remained low in the United States, the latest data out Tuesday showed some pickup, mainly from increases in gas and rent. A Goldman Sachs analysis also found items that have had tariffs placed on them are seeing costs rise.
In contrast to today’s surprise announcement from the United States Trade Representative office, the stock market has a rally, especially towards businesses from the tech industry.
Technology investors welcomed news of the exemptions, pushing an index of chip stocks up 2.8%. Retailers and industrial shares also rose, with General Electric up 4.4%.
On Wall Street, the three main share indexes were up more than 2% at one stage. The Dow Jones and S&P 500 finished 1.4% ahead, while the tech-dominated Nasdaq finished up 1.9% – led by a 4% rise in Apple.
In the UK, stocks exposed to global trade also rose, with miner Glencore closing up 2.3%.
For tech products, most of these businesses outsource production in China, where they are cheaper. Big companies like Apple have their iPhones made there—American brands but China-made. In turn, when they make their way back to the US, they will have to endure the tariffs imposed by Trump’s administration.
Especially with the Christmas season coming in a few months, most people often buy tech products as presents for friends and family members. Delaying tariffs on these products should allow consumers to not feel the burden of the tariffs by then.
The President could also have been motivated by growing concerns that the ongoing trade war could trigger a global recession and hurt his chances for re-election in 2020.
Nevertheless, the USTR’s announcement was released minutes after China’s Ministry of Commerce conducted a phone call with US trade officials.
Earlier on Tuesday, China’s chief trade negotiators, Vice Premier Liu He, and Commerce Minister Zhong Shan spoke to their US counterparts, Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer.
The Xinhua news agency said that the Chinese officials expressed concerns over the tariffs that will be imposed on September 1st and how it could negatively impact both parties.
Trade talks between the US and China are set again in the next two weeks. However, it is unclear whether this would be a face-to-face conversation or another one via a phone call. Based on recent trade proceedings, the outcome could not be any more positive.
Additional details and lists of the specific product types affected by the announcement are due to be published by USTR later.