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Global Trade Deep Dive

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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. 

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.

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

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.

NAFTA

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 wanted to review all current free trade agreements.

Trump followed by launching negotiations in 2017 to modernize the landmark North American Free Trade Agreement, which has boosted trade between the United States, Canada and Mexico for a quarter-century. After a year of talks with Canada and Mexico, Trump told Congress this August that he planned to sign an agreement reached with Mexico alone but that Canada might still be added. NRF said coming to terms with Mexico was “encouraging” but called Canada “an essential trading partner” and said all three countries must be included to preserve the agreement’s benefits to U.S. businesses, workers and consumers. At the end of September, the administration announced that the new pact had been expanded to include Canada and would be called the United States-Mexico-Canada Agreement rather than NAFTA. NRF is reviewing the details “to ensure it promotes U.S. economic growth and maintains access for products American families need at the prices they can afford” but welcomed the inclusion of all three countries. Under procedures for approval, a vote by Congress is not expected before the first quarter of 2019.

NRF is working to ensure that NAFTA modernization efforts do 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 USTR 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.

Other trade efforts

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.