If The U.S. And China Don't Reach A Trade Deal, Consumers Will Soon Feel The Impact

Originally published on February 16, 2019 6:00 pm
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SCOTT SIMON, HOST:

If the United States and China fail to reach an agreement on trade this month, tariffs may soon reach directly into consumers' pockets. Farmers and manufacturers have been affected for months. This latest round of talks puts more at stake for more people. Grant Gerlock of NET News in Nebraska reports.

GRANT GERLOCK, BYLINE: In September, the Trump administration launched its biggest round of tariffs yet - a 10 percent tax on thousands of Chinese products, including a lot of everyday stuff. At this dollar store, I found a pair of pliers, some wall screws, eyeliner, a bath mat - all on the tariff list. But that doesn't mean the price on the tag is 10 percent higher.

UCHE JARRETT: I can't stress to you how much companies care about maintaining that stability.

GERLOCK: That's Uche Jarrett, who teaches international economics at the University of Nebraska-Lincoln.

JARRETT: It drives their profit margins. It drives their estimates for the future. Whenever there is a change, there's a lot of uncertainty that follows.

GERLOCK: Jarrett says so far, suppliers and retailers are shielding consumers from price hikes. They'd rather ding profits than lose customers. But soon consumers might have to pay up. The administration's tariffs are aimed at narrowing the trade deficit with China. If there's no deal by March 1, that 10 percent tariff will jump to 25 percent.

Irv Blumkin is CEO of the home furnishings chain Nebraska Furniture Mart. He says a 25 percent tariff would lead to higher prices at his store for everything from carpet to patio furniture.

IRV BLUMKIN: At 10 percent, you can come to a very minimal change. At 25 percent, it becomes a different deal.

GERLOCK: Blumkin is concerned a higher tariff will scare away his shoppers.

BLUMKIN: You know, they hear the news every day. And they see some of the uncertainties that are going on. And I think that impacts how people think.

GERLOCK: Irv Blumkin says some manufacturers are moving their production to countries like Vietnam, Malaysia or Mexico. While importers are scrambling, you might think that American manufacturers are benefiting from the tariffs. But maybe not. Take Bison, a company in Lincoln, Neb., that makes sports hardware.

I met CEO Nick Cusick at a local YMCA, where some office workers were playing a round of pickup basketball. The rims, the backboards and the wall pads were all made by Bison. Almost all the parts and pieces were manufactured in the U.S., too.

NICK CUSICK: Since we do compete against a fair number of companies who buy offshore, you would think generally speaking that we would benefit from...

GERLOCK: Yeah, aren't you supposed to be the winners in this thing?

CUSICK: We're supposed to be the winners.

GERLOCK: But Cusick says there's a problem. When the U.S. raised taxes on imported steel, the price for American steel skyrocketed by as much as 50 percent. Bison had to raise its prices this year to cover costs.

CUSICK: But the end users - the schools, the consumers on our residential basketball side of our business - they're the ones that are getting hit. So it's kind of counterproductive.

GERLOCK: Unless the U.S. reaches a deal with China in the next few weeks, more businesses will be raising prices. And that's when more consumers will begin to realize that trade wars come with a cost that they'll be feeling in their wallets.

For NPR News, I'm Grant Gerlock.

SIMON: That story comes to us from Harvest Public Media, a reporting collaboration that focuses on agriculture and rural issues. Transcript provided by NPR, Copyright NPR.