Jul. 17, 2018

What the Newest Round of Tariffs Means for Consumer Goods Brands

Jordan Harris

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The White House announced last Tuesday that it would impose a 10% tariff on an additional $200 billion worth of Chinese goods ranging from fish to petroleum.

If consumer goods brands pass through the costs of the _new _ tariffs, that would lead to price increases at many U.S. retailers, ultimately affecting American consumers. While apparel is largely unaffected, these tariffs would affect food, tires, luggage, electronics, housewares, and countless other consumer goods.

The first round of tariffs was largely aimed at goods that businesses purchase, including plastics, machinery, and semiconductors. The round announced on Tuesday is the third in a series of tariff announcements by the White House.

Last week, the U.S. levied tariffs on $34 billion of Chinese exports on goods such as machinery and electronics. China has retaliated, also levying tariffs on $34 billion of U.S. goods. If all threats are carried out, the U.S. would levy tariffs on a total of $250 billion worth of Chinese goods.

While it’s likely that Beijing will respond with additional threats of retaliation, the U.S. Trade Representative Robert Lighthizer says he’s open to resolving the dispute with China. Despite this, no negotiations are scheduled.

If the tariffs take effect, administration officials report that it won’t be for at least two months. Hearings are scheduled for the U.S. industry to comment on the products on August 20-23.

How will this affect you?

Here are full lists of the affected HTS codes for the $34bn in effect, the $16bn not in effect, and the most recent $200bn not in effect. Some importers, including a number of Flexport clients, will be deeply affected by these tariffs if implemented. The degree to which any business is affected by the trade war will be determined by the type of business and products.

As a good first step, we recommend visiting flexport.com/data to calculate the total value of affected tariff codes that correspond to your company’s products. If your business would be impacted by the tariffs, we recommend voicing your comments prior to the hearings in August.

If your goods are subject to the new tariffs, you have a few options:

  • Pass the incremental costs to customers by raising prices

  • Assess margins and absorb the incremental costs

  • Seek alternative suppliers outside of China

  • Review tariff engineering—could bringing in parts to be assembled in the US change the HTS applicable?

  • Build an inventory buffer in case you need time to find new suppliers

We will be providing additional information and guidance in the weeks ahead. Please don’t hesitate in contacting us as you navigate the new trade landscape.

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