Some Maryland business owners are welcoming stringent U.S. tariffs on Chinese imports, but economists warn they also will mean rising prices on a variety of consumer goods.
President Donald Trump recently instructed U.S. Trade Representative Robert Lighthizer to raise existing tariffs — or taxes on goods entering the country’s borders — for about $200 billion worth of Chinese imports from 10 percent to 25 percent. He also ordered him to prepare to raise tariffs on all remaining imports from China valued at about $300 billion.
The announcements are the latest development in what some call a trade war between the United States and China. The latest tariff increases appear to target a list of finished products, as opposed to raw materials.
How the 25 percent tariff on all Chinese imports will affect local businesses is unclear, but one Maryland economist said consumers could start to see price increases at mass merchants and dollar stores within several weeks.
Retailers and their Chinese manufacturers that might have resisted raising prices in the previous round of tariffs, instead absorbing higher costs, might be forced to raise prices, said Daraius Irani, chief economist of Towson University's Regional Economic Studies Institute.
“At some point, the dam is going to break,” Irani said. “The retailers and the manufacturers have to make their profits.”
U.S. shoppers likely will bear the higher costs — unless they can find similar products made in the U.S. or elsewhere for less, he said.
If consumers notice a significant price increase on discretionary products and services — meaning nonessential items such as a nice pair of headphones — they might change their spending habits, said Jason Zhang, chair of the marketing department at Loyola University Maryland.
For necessity items, consumers will continue to buy despite changes in price, at least in the short term, Zhang said.
One trade group estimates that a family of four will be charged an additional $500 a year to cover the most recently proposed tariffs on clothing, shoes, travel goods and related items. The American Apparel & Footwear Association, which represents retailers, manufacturers and brands, said Monday that taxing the additional $300 billion worth of Chinese imports, including clothing and shoes, would lead to higher prices, lower sales and lost jobs.
“This is a self-inflicted wound that will be catastrophic for the nation’s economy,” said Rick Helfenbein, the group’s president and CEO, in a statement. “By tightening the noose and pulling more consumer items into the trade war, the President has shown that he is not concerned with raising taxes on American families, or threatening millions of American jobs that are dependent on global value chains.”
A reduction in Chinese imports and exports at the Port of Baltimore also could hurt those dependent on that business, such as short-haul truck drivers who transport goods from the port or Western Maryland coal producers, Irani said.
So far in 2019, key commodities coming through the Port of Baltimore are performing at high levels, said Richard Scher, a spokesman for the Maryland Port Administration. The tariff increases could change that.
“We are obviously closely monitoring this,” Scher said in an email. “It could result with specific import and export commodity fluctuations until it’s resolved. We are hopeful and optimistic it will be resolved.”
The owner of Joe’s Bike Shop in Mount Washington and Fells Point said he hasn’t seen any significant price hikes due to tariffs, even though increased taxes on bikes, parts and accessories began taking effect last year.
“The companies that we are dealing with foresaw the proposed tariffs and moved some of their production away from China to Taiwan,” owner Joe Traill said.
Some brands have absorbed higher costs as they try to keep products in an affordable range, especially lower-priced bikes. But if the cost of parts keeps going up, bike prices overall could be forced higher in the future, Traill said.
Still, several Maryland-based businesses embraced the trade war as a positive for them.
Kevin Luskin, who co-owns the Maryland-based The Big Screen Store and The Sofa Store, said a global supply chain — where products are made of components from multiple countries — will likely cushion his customers from feeling the sting of tax hikes.
Though Luskin doubts his stores’ products will see a price increase, the sales teams have been prepared with hypothetical tariff explanations to assuage concerned customers, he said.
For example, The Sofa Store may stock a $1,000 couch with Chinese origins, but that doesn’t mean the cost of the couch will go up 25 percent, Luskin said. Maybe the couch’s only part coming from China is the fabric valued at $100. In that case, the U.S. tariff would increase the price by a more digestible $25, he said.
Luskin believes the tariffs actually could make some U.S. products look like a better bargain if the Chinese competitor gets 25 percent more expensive.
“I’m glad to see that finally our government is doing things proactively to defend our workers,” he said. “It’s about time.”
Maryland business owner Scott Macdonald echoed Luskin’s anticipation that tariffs would bolster American product sales. Macdonald co-owns Maryland Thermoform Corp., a Baltimore company that manufactures items that include laboratory supplies — a category on the U.S. list of Chinese items that will now carry a tariff.
“We fight them daily,” Macdonald said of Chinese manufacturers. “Their prices tend to be cheaper, quality tends to be lower. So tariffs, it sounds good to me. They're attempting to put us out of business with sometimes inferior products.”
Macdonald has resisted purchasing raw materials and finished goods from China for years. For companies like his that work with plastic products, the tariffs are a “long time coming.”
“They sell lowest price against us all the time,” he said. “They have to treat us with some respect.”
However, China retaliated by imposing tariffs on $60 billion of U.S. goods and that could put additional pressure on agriculture in Maryland and elsewhere in the U.S., said Roger J. Kashlak, professor of international business at the Sellinger School of Business at Loyola University Maryland and Temple University.
China’s tariffs on U.S. goods will hurt suppliers who already are dealing with higher labor costs than China and the impact of a strong dollar, making goods from Maryland and elsewhere more expensive for Chinese consumers. That likely will squeeze U.S. sales to China and have an impact on employment at U.S. firms.
“It will affect our jobs and ability to innovate,” Kashlak said. “This is very short-sighted for both the U.S. and China. It’s a trade war and it’s not economically intelligent.”