ABC 2019: “Tariffs are taxes that are paid by U.S. companies”

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WASHINGTON, D.C. — The trade war between the United States and China continues to escalate, with China retaliating against President Trump’s latest move by hiking tariffs on $60 million of imported American goods.

On Friday, Trump raised a 10 percent tariff on $200 billion of Chinese goods to 25 percent.

“There are several marine-related components, materials and parts on list three that were impacted by the increase to 25 percent,” National Marine Manufacturers Association government relations director John-Michael Donahue told Trade Only Today on Monday.

List four has not been posted yet, but the NMMA expects it will be released in the coming days.

“When it does, it’s all but guaranteed to have additional marine related products on it,” said Donahue.

The tit-for-tat tariffs were the topic of a seminar on Monday at the American Boating Congress, the recreational boating industry’s annual fly-in to Capitol Hill that runs through Wednesday.

“We’ve been complaining about China for years, we just don’t think tariffs are the right approach,” Jonathan Gold, vice president of supply chain and customs policy at the National Retailers Federation, told attendees at the session in Washington D.C. “Tariffs are taxes that are paid by U.S. companies that are passed along to U.S. consumers. They’re not paid by the Chinese, they’re not paid by the Europeans, they’re not paid by the Canadians, they’re not paid by Mexicans — just like the wall isn’t paid for by the Mexicans — tariffs are taxes that are paid by U.S. entities.”

The U.S. Chamber of Commerce has a website regarding tariffs called TheWrongApproach.com, said Garrett Workman, director of European affairs at the U.S. Chamber of Commerce.

“So that tells you a little bit about how we feel about using tariffs as leverage, quote-unquote,” Workman said.

The Office of the U.S. Trade Representative has not announced an exclusion process for list 3 — a way that some companies with products on list 1 have successfully avoided tariffs.

“We’re still unclear what the determining factors the USTR is using for their decision,” said Gold. “They’ve only done a few of the list 1 exclusions and they haven’t done any list 2 yet. When those list 3 exclusions start, they’re going to be overwhelmed.”

During testimony before Congress about tariffs, several manufacturers talked about how difficult, if not impossible, it has become to source materials from other countries, said Gold.

“A lot of them talked about the complexities of sourcing — it’s not a light switch,” said Gold.

Massachusetts components manufacturer and distributor Imtra has been grappling with that issue on certain products, president and CEO Eric Braitmayer told Trade Only.

“We have one line that brings some things in directly from China,” said Braitmayer. “Other items that we have built in the USA are getting hit because some sub-components — raw metal parts — are made in China.”

Imtra has tried to limit the impact on customers.

“But unlike what you hear from the White House, Americans — either us, or our customers — are paying the costs, not China,” said Braitmayer, echoing panelists at the ABC seminar. “We have not seen cost reductions by Chinese suppliers to help address the issues. What the White House doesn’t understand is that you can’t just choose to source elsewhere without retooling, and that takes time and money.”

The trade war also took a toll on markets on Monday.

The Dow dropped 617 points as Wall Street reacted to the new measure that affects more than 4,000 U.S. goods, most of which will carry 25 percent tariffs versus the 10 percent tariff they did have. The S&P 500 fell 2.4 percent, its worst day since Jan. 3, and the Nasdaq dropped 3.4 percent, according to CNN.

The escalating tariffs are testing investors’ faith in U.S. growth, according to The Wall Street Journal.

Gains in U.S. stocks have made them historically expensive relative to global equities. Economic growth remains solid, but some analysts and investors told The WSJ the escalation of trade tensions underscores the fragility of this year’s rally, which was spurred by hopes the U.S. could avoid a slowdown hitting other parts of the world.

That’s being offset by fears that American consumers will suffer if they ultimately have to bear the brunt of the tariffs.

Company representatives visiting elected officials on Capitol Hill this week should stress how much the trade war is costing them, said Gold.

“The president keeps putting out the message that hundreds of billions of dollars are filling the U.S. Treasury and they’re being paid by somebody else,” said Gold. “No. Those are taxes coming out of your pockets. Make sure you are very clear on that message going forward.”

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