President Donald Trump last week "instructed the [United States Trade Representative] to consider whether $100 billion of additional tariffs [against China] would be appropriate ... and, if so, to identify the products upon which to impose such tariffs." This comes after the president signed off on a plan to enact a 25% tariff on imported steel as well as a 10% tariff on aluminum imports.
Trump's move comes after Chinese leadership imposed its own set of tariffs on about $3 billion worth of U.S. imports. These include a 15% tariff on 120 American products ranging from fruit to steel pipes, as well as a 25% tariff on eight other products including recycled aluminum and pork. The Chinese government made it clear that its actions were directly related to Trump's moves regarding steel and aluminum.
It's a back and forth that has set off talk of these battles escalating into a full-scale trade war. That's something the Trump administration has downplayed, but a trade association that represents retailers -- a group that will feel some of the pain of a trade war -- does not think the president is correct.
Retailers fire back
Matthew Shay, CEO of the National Retail Federation (NRF), which describes itself as the world's largest retail trade association, issued a statement after Trump suggested the added $100 billion in tariffs.
"This is what a trade war looks like, and what we have warned against from the start. We are on a dangerous downward spiral and American families will be on the losing end," he said. "To be clear, we agree it's time to address China's unfair trade practices, but an additional $100 billion in tariffs amount to $100 billion in taxes on the American people. Tax reform delivered a real benefit to working families, and tariffs take them away."
For Trump, the tariffs are a negotiating ploy.
"The United States is still prepared to have discussions in further support of our commitment to achieving free, fair, and reciprocal trade and to protect the technology and intellectual property of American companies and American people," Trump said in a statement after he asked the USTR for additional tariffs.
Fear of escalation
The NRF's CEO does not see China quickly backing down. While not naming Trump in his press release, Shay was quoted as saying:
These tit-for-tat trade actions could spell disaster for the U.S. economy and make it harder for Americans across the country to afford everyday products and basic necessities. It is inevitable that China will respond with more retaliatory actions that cause even further harm to American farmers, businesses, and consumers. We urge the administration to change course and stop playing a game of chicken with the nation's economy.
Will either side back down?
Although it remains possible negotiations will stop the escalating battles, it's hard to see the U.S. and China trading tariff announcements as anything other than the start of a trade war that could have near-immediate financial consequences for the American people, as Shay noted above.
It's worth mentioning, however, that the NRF does not disagree with the president on the concept of dealing with China's trade practices. It only takes issue of an approach that puts the American public in a position to pay more for imported goods from China when that might have been avoided with diplomacy.