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September 10, 2018

China Promises Retaliation If Trump Imposes More Tariffs

An intensifying trade war could have negative impacts on the promo industry.

By  Theresa Hegel

China on Monday said it would retaliate if President Trump moves forward with another threatened round of tariffs – potentially troubling news for the promotional products industry. Trump said on Friday that he was considering imposing tariffs on an additional $267 billion of Chinese products. That would come on top of the $50 billion of goods already hit by 25% duties and another $200 billion poised for a tariff increase.

“If the U.S. side obstinately clings to its course and takes any new tariff measures against China, then the Chinese side will inevitably take countermeasures to resolutely protect our legitimate rights,” Geng Shuang, China’s foreign ministry spokesman, said during a regular press briefing.

He didn’t elaborate on what that would mean, leaving many American companies nervous that China might target their operations by withholding licenses or launching anti-monopoly investigations, as it runs out of imports for penalties. China matched Washington’s first round tariff hikes on $50 billion of its goods. When the U.S. proposed its second round of tariffs for an additional $200 billion of goods, China came back with a list of only $60 billion American products for possible retaliation. So far, China has mostly targeted farm goods. Trade between the two countries is lopsided, with the U.S. importing $3 of Chinese goods last year for every $1 of American goods bought by China. Last year, China imported a total of $153.9 billion of U.S. goods.

A prolonged trade war between the two countries could be a challenge for the promotional products industry, as prices on imported Chinese-made goods would increase, and firms would then have to decide whether to take a hit in their margins or pass on the added cost to buyers.

Joshua White, of Top 40 distributor BAMKO (asi/131431), has written in a white paper that the tariffs would disrupt global supply chains and slow economic growth. “Expect to see the financial impact start hitting consumers and retailers in the 2018 holiday season,” the general counsel and senior vice president of strategic partnerships for BAMKO wrote.

The tariffs already seem to be having an impact on major U.S. corporations’ decisions. Ford, for example, dropped a plan to import its compact Ford Focus Active model to the U.S. from the Chinese factories where the car is made. In a tweet, President Trump suggested that Ford could now build the car in the U.S.

However, representatives from Ford say there are no plans to do this, since the expected lower sales volume in the U.S. – where SUVs and larger vehicles still reign supreme – would preclude profits.

Apple has said the tariffs could mean price hikes on its products, including its smart watch and charging cables. “Our concern with these tariffs is that the U.S. will be hardest hit, and that will result in lower U.S. growth and competitiveness and higher prices for U.S. consumers,” the company wrote in a letter to the U.S. trade representative. Trump subsequently tweeted his solution: The tech giant should start building new plants in the U.S.