Sweeping US Tariffs on Chinese Goods Expected to Raise Prices

A comprehensive new US tariff on products manufactured in China is anticipated to escalate the cost of a broad range of items, encompassing inexpensive apparel retailed on online platforms to toys and electronic devices such as laptops and cellphones. An additional 10% tariff on all Chinese merchandise took effect on Tuesday, a day after President Donald Trump consented to suspend his impending tariffs against Mexico and Canada for 30 days. This postponement followed discussions concerning Trump's request that these North American nations implement measures to reduce illicit immigration and the inflow of narcotics such as fentanyl into the US.

In the absence of receiving a comparable exemption from the White House, China retaliated by implementing retaliatory tariffs on selected US products, set to commence next week. The vast quantity and diversity of Chinese-made merchandise sold in the US indicate that consumers will likely encounter increased prices for numerous typically affordable items should the retaliatory tariffs persist. The following are some of the commodities most susceptible to being affected:

Electronics, Home Supplies, and Auto Parts

The US Census Bureau indicates that in 2023, the most recent year with complete data, the US imported approximately $427 billion worth of products from China. The primary import categories include consumer electronics such as cellphones, computers, and other technological accessories. China remains a dominant manufacturing hub for technological equipment, including for American corporations like Apple, which assemble their products in China. The Consumer Technology Association trade organization reported that in 2023, China accounted for 78% of US smartphone imports and 79% of laptop and tablet imports.

The tariffs may also impact the prices consumers pay for typically inexpensive clothing, footwear, and kitchenware such as pots and pans, as well as larger items like appliances, furniture, and auto parts. Jay Salaytah, 43, who owns and operates his auto repair shop in Detroit, stated that he purchased certain equipment sooner than he would have otherwise, anticipating that they would incur higher costs if Trump implemented his campaign promise to employ import tariffs as a means to stimulate US manufacturing. "I anticipated that the costs would rise, and these are manufactured in China," said Salaytah, referring to a probe test light he purchased before Tuesday's tariff came into effect.

Low-Cost Apparel and Accessories

In addition to implementing a new tariff on Chinese imports, Trump's executive order also discontinued a lesser-known trade exemption that permitted products valued at less than $800 to enter the US duty-free. The order allowed the potential for the loophole to remain in use for shipments from other countries.

The trade policy, known as "de minimis," has been in effect for almost a century. It gained increased scrutiny in recent years due to the rapidly growing volume of low-cost items entering the US from China, primarily from prominent China-founded online retailers like Shein, Temu, and Alibaba's AliExpress. The administration of former President Joe Biden proposed a crackdown on the loophole in September, but the regulations did not take effect before Biden departed office.

Shein and Temu have garnered global acclaim by providing a continually updated selection of ultra-inexpensive apparel, accessories, gifts, and gadgets shipped predominantly from China, allowing the two e-commerce businesses to compete effectively with American companies on their home turf. Amazon, headquartered in Seattle, is attempting to compete with them through an online storefront that emulates their business model by offering low-cost items delivered directly from China.

According to a report released last week by the Congressional Research Service, Chinese exports of low-value parcels soared to $66 billion in 2023, up from $5.3 billion in 2018. The report indicated that in the US, Temu and Shein comprise approximately 17% of the discount market for fast fashion, toys, and other consumer products.

Anticipated Price Increases

The extent of price increases remains uncertain. Under de minimis, Shein, Temu, and AliExpress could avoid taxes levied by customs authorities. However, analysts indicate that under the modifications implemented on Tuesday, shipments from China will now be subject to existing tariffs in addition to the new 10% tariff imposed by Trump.

Youssef Squali, an analyst at Truist Financial, stated, "The vast majority of these orders are valued at less than $800, indicating that virtually all of them will be affected."

Juozas Kaziukenas, founder of the e-commerce intelligence firm Marketplace Pulse, expressed his belief that price increases on platforms like Shein and Temu will be "relatively small," and the products they sell will remain affordable. However, Kaziukenas noted that the policy change will likely result in delivery delays since packages are now required to undergo customs inspections.

According to Squali, the new tariffs will also affect third-party merchants on Amazon that source products from China. He anticipates that vendors will absorb some of the costs and pass the remainder to customers, which he believes may result in percentage price increases in the mid-single digits. Squali further stated that other e-commerce platforms hosting businesses, such as Etsy, will also be impacted.

Temu, owned by China's PDD Holdings, has previously stated that its growth is not reliant on the de minimis policy. Although the majority of its products are shipped from China, Temu has been onboarding Chinese merchants to store inventory in the US, a strategy that experts believe would minimize its exposure to trade policy fluctuations. In January, China also introduced measures to assist cross-border e-commerce in developing overseas warehousing by offering tax rebates or exemptions.

Responses from US Retailers

The day following the November US presidential election, Brieane Olson, CEO of teen clothing chain PacSun, traveled to Hong Kong to meet with factory executives and devise strategies to prepare for Trump's tariff proposals.

Roughly 35% to 40% of PacSun's garments are produced in China, although the chain has accelerated efforts to diversify by working with suppliers in nations like Cambodia and Vietnam. However, Olson stated that Trump's 10% tariff on Chinese products was less severe than the company had anticipated. PacSun currently does not intend to raise prices on its products or relocate its knitwear and denim production outside of China.

Toys are another category of consumer products heavily dependent on imports from China. Greg Ahearn, the president, and CEO of The Toy Association trade group, expressed his belief that toy manufacturers sourcing from China will initially absorb the cost of the new tariff. However, Ahearn indicated that these price increases will eventually be passed on to the consumer.

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Associated Press reporters Anne D'Innocenzio in New York and Christopher Rugaber and Didi Tang in Washington contributed to this report.