Tariffs

The issue

President Trump has focused on the trade deficit since his candidacy and has sought to rewrite global trade rules since taking office. The latest action has been the announcement of a series of tariffs that have sparked a trade war between the United States and China and other countries.

Why it matters to retailers

Retailers rely heavily on imported merchandise to provide American families with the products they need at prices they can afford. Tariffs are a tax paid by American companies that import products – not by the foreign governments targeted by the tariffs. And tariffs of the levels imposed in the past year are too large for retailers to absorb, meaning they are ultimately passed on to consumers in the form of higher prices. Many of the products affected by the current tariffs are no longer made in the United States, meaning retailers cannot simply switch to U.S. suppliers.

China on globe

China tariffs

The tariff developments began in August 2017, when the Office of the U.S. Trade Representative announced an investigation under Section 301 of the U.S. Trade Act of 1974 looking at China’s unfair trade practices regarding forced technology transfers, intellectual property rights enforcement and other actions. Following hearings and a report, Trump announced this March that he would seek a 25 percent tariff on $50 billion worth of Chinese products, World Trade Organization action against China and investment restrictions.

In April, USTR released the list of potential Chinese products that could be subject to the tariffs. China responded by saying it would impose an equal amount of tariffs on U.S. products, prompting the White House to say it would consider tariffs on an additional $100 billion worth of Chinese products.

The Luggage Shop of Lubbock is a third-generation family business that's been serving Texans for 67 years. But with more than 85 percent of the products in her store imported from China, owner Tiffany Williams says tariffs on travel goods imported from China will be detrimental to her business.

NRF testified in opposition to the tariffs at a USTR hearing in May, saying “prices will rise and the economy will suffer.” The final list included tariffs on $34 billion worth of goods that took effect July 6 and tariffs on the remaining $16 billion that took effect August 23. As expected, China announced its own tariffs on U.S. products, prompting Trump to say he would impose tariffs on another $200 billion in Chinese products – double the amount threatened earlier. USTR released that list on July 10, and NRF testified that the proposal has set off a “scramble” to find non-Chinese sources of merchandise that is already driving up the cost of goods from other producers around the world and will eventually lead to higher prices for U.S. consumers. NRF released a study showing that Americans could pay close to $6 billion more annually for furniture and travel goods alone even if they come from the United States or countries other than China. The final version of the $200 billion list was released in September, with 10 percent tariffs taking effect September 24 and the level scheduled to increase to 25 percent on January 1.

The latest round of tariffs came as NRF and more than 100 other trade associations announced the formation of Americans for Free Trade, a new coalition aimed at opposing tariffs and highlighting the benefits of international trade to the U.S. economy.

NRF has urged the administration to “change course and stop playing a game of chicken with the U.S. economy.” NRF believes tariffs will drive up the price of both imported consumer products and U.S.-made products built from imported parts, amounting to a tax on American consumers that could offset the benefits of recently passed tax reform.

A study conducted for NRF based on April’s original list found that tariffs on even just $50 billion in imports would cause a $2.9 billion drop in U.S. gross domestic product and the loss of 134,000 U.S. jobs. Adding tariffs on an additional $100 billion in imports would bring the total to a $49.2 billion loss in GDP and 455,000 jobs lost. Four jobs would be lost for every job gained, according to the report.

NRF has voiced concerns about the tariffs with the White House, hosted coalition meetings bringing together representatives of retail and other affected industries, and coordinated comments to USTR signed by over 100 companies. NRF has also worked extensively with the news media, warning against tariffs in outlets ranging from the New York Times to the Today Show. In May, NRF aired a television commercial on Saturday Night Live and other TV programs featuring actor and economist Ben Stein recreating his role from the movie "Ferris Bueller’s Day Off" to explain that tariffs are “B-A-D economics.”   

steel and aluminum tariffs

Steel and aluminum tariffs 

While the tariffs above are specific to China, Trump announced in March that he would impose tariffs of 25 percent on steel and 10 percent on aluminum from a wide variety of countries under Section 232 of the Trade Expansion Act of 1962, which allows tariffs based on national security issues. The tariffs, which were the result of an investigation initiated last year, were announced as part of a White House “listening session” with executives from U.S. steel and aluminum makers. While some countries have been exempted, the tariffs apply to China, Canada and Mexico along with the European Union. Both Canada and the EU have announced retaliatory tariffs.

NRF called the steel an aluminum tariffs a “self-inflicted wound on the nation’s economy” and said they would drive up prices for U.S. consumers on metal-dependent products from canned goods to automobiles. NRF has endorsed legislation that would require congressional approval of Section 232 tariffs, urging Congress to “play a leading role in mitigating escalating trade tensions with our strongest allies.” 

In September, NRF was one of the sponsors of a "Trade Builds America" event in Washington where small businesses outlined concerns with the steel/aluminum and other tariffs. Lincoln, Neb., appliance dealer Ron Romero spoke on behalf of NRF, saying the tariffs had already driven up the price of refrigerators as much as 12 percent, prompting customers to choose lower-cost models or skip purchases altogether.

Learn more about global trade

Global Trade
 
U.S. companies need modern trade policy in order to become more competitive and grow.
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NAFTA
 
NRF supports NAFTA modernization but warns that withdrawal from the agreement should not be considered.
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Small retailer cites ‘trickle-down effect’ of tariffs
 
American small businesses feel the stress of the growing trade war.
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