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Global Trade Deep Dive

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China Tariffs

President Trump’s continued focus on reducing the trade deficit and increasing demand for domestic goods took a new turn this spring with the announcement of a series of tariffs that are threatening to spark a trade war between the United States and China and other countries.

The developments began with new tariffs on steel and aluminum from a variety of countries announced in early March, which were followed by the announcement of tariffs on $50 billion worth of Chinese products announced the first week of April as a result of China’s intellectual property rights violations and forced technology transfers. China responded with an equal amount of tariffs on U.S. products the next day, prompting the White House to say it would consider tariffs on an additional $100 billion worth of Chinese products.

Clothing, shoes, toys and furniture were spared from the original list of Chinese products targeted by U.S. tariffs, but appliances, televisions, cash registers and other products that could affect retailers were included.

NRF responded to each of the White House moves, urging the administration to “change course and stop playing a game of chicken with the U.S. economy.” NRF has said tariffs would 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 and the Consumer Technology Association found that the initial round of tariffs on $50 billion of Chinese imports and expected retaliation from China would cause a $2.9 billion drop in U.S. gross domestic product and the loss of 134,000 U.S. jobs. Adding the possible tariffs on the 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.

A separate study done for NRF and CTA found the tariffs would drive up the price of Chinese-made television sets by 23 percent, costing U.S. consumers an estimated $711 million over the next year for televisions alone.

NRF is talking to the White House, the Office of the U.S. Trade Representative and members of Congress in an attempt to keep the tariffs from taking effect, and has hosted coalition meetings bringing together representatives of retail and other affected industries. NRF has also worked extensively with the news media, warning against tariffs in outlets ranging from the New York Times to the Today Show.  

Trump has long maintained that discouraging imports would bring back millions of manufacturing jobs even though most economists say that is unlikely. Within days of taking office, he signed an executive order withdrawing the United States from the Trans-Pacific Partnership trade agreement, and indicated that he wants to review all current free trade agreements. Trump followed by launching renegotiation of the landmark North American Free Trade Agreement, which has boosted trade between the United States, Canada and Mexico for a quarter-century. Talks with Canada and Mexico that began last August are continuing. 

More about NAFTA

NRF is working on Capitol Hill and with the administration to educate policymakers on the importance of international trade to the economy and to warn of the negative impact that would come with new tariffs. Anti-trade actions and proposals ignore the fact that many affected goods are no longer made in the United States. Retailers and other importers could not easily or quickly switch to domestic sources because they do not exist on the scale that would be needed. Even if there were an eventual switch to U.S. sourcing, it would take years to build up a base to support it. And new U.S. factories would likely be high-tech and highly automated, creating relatively few new jobs.

In 2017, NRF and other business groups formed the U.S. Global Value Chain Coalition to educate the public and policymakers about the U.S. jobs and economic contributions included in products manufactured elsewhere. In one example, a study conducted for the coalition found that 75 percent of the retail price of five types of apparel examined goes to U.S. contributors.

In addition to efforts on the current tariff announcements, NRF is working to ensure that renegotiation of NAFTA does not harm the underlying agreement, and is closely monitoring other issues. NRF agrees that a number of NAFTA’s provisions need to be updated to reflect today’s business environment, including issues such as digital trade, for example. But NRF told the Office of the U.S. Trade Representative that the priority in negotiations should be to “do no harm” to the existing pact.

NRF has said threats by the White House to withdraw from NAFTA or include a sunset provision “should be a non-starter.” Other proposals to include restrictive new rules of origin, new trade remedies or the elimination of investor protections would significantly weaken the agreement and should be rejected. In an op-ed, NRF President and CEO Matthew Shay said an end to NAFTA would cost the United States jobs and harm the economy while resulting in higher prices for consumers and reduced availability of products ranging from apparel and electronics to fresh fruits and vegetables.

A study conducted for NRF and other trade associations found that withdrawing from NAFTA would cost consumers $5.3 billion in higher prices because of tariffs that would be imposed on goods from Mexico and Canada. Retailers would see a $10.5 billion hit to their bottom lines, and 128,000 retail-related jobs could be lost over three years.

NRF has helped lead lobbying visits to Capitol Hill to reinforce the message that the business community supports NAFTA modernization but that withdrawal should not be an option. NRF wants Congress to assert its oversight authority to ensure that the negotiations improve the agreement rather than weaken it.