Consumer Technology Group Leader Worried About Impact of 25% Tariff Hit After First of Year
BOSTON -- The effects of the 10 percent Section 301 tariffs on $200 billion worth of Chinese imports, which the Trump administration imposed last month (see 1809240015), aren’t likely to be felt at retail this holiday season, Consumer Technology Association President Gary Shapiro said Oct. 15 at the association's Innovate Celebrate conference. Shapiro’s bigger concern is what happens after Jan. 1 when the tariffs are scheduled to rise to 25 percent. Jan. 1 is a “very critical date because 10 percent is a lot different than 25 percent, Shapiro” said. “Ten percent hurts; 25 percent makes companies reel. The pain throughout the industry is real -- and soon to the consumer and retail is real.”
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Responding to a question about whether CTA will pursue steps to sue the Trump administration over the third tranche of tariffs, Shapiro said: “There’s definitely a reason to question the legality of what the president has done because the Constitution lays out our laws, the Constitution gives Congress the authority to raise taxes, the tariff is a tax, and there’s a very serious question of whether Congress has given the president the authority to raise tariffs because of retaliation.”
Despite President Donald Trump’s efforts to peg stock market losses over the past week to interest rate concerns, Shapiro attributed Wall Street “shivers” to tariffs. He left open the possibility of a domino effect involving other events -- the stock market, elections and the overall economic mood -- that could impact the holiday season. “There’s all this talk about how the trade deficit with China has increased recently,” Shapiro said. A large part of the increase owes to “companies trying to get stuff in before the 10 percent, and now before the 25 percent,” he said. Bottom line, “I don’t think you’ll see much of a response [to tariffs] -- depending on what the market does and unpredictable things -- this holiday season, but certainly it’s a 2019 concern.”
The expected import tariff jump to 25 percent “has a huge impact on all sorts of companies,” Shapiro noted, singling out JL Audio as one electronics company that imports components from China and is feeling the effects of the tax bite. He cited other industries also being hit hard by the trade war with China: agriculture, steel and automotive, with Ford standing out for its recently announced layoffs resulting from tariffs.
Shapiro praised the administration, though, for standing up to China, saying most industry leaders think China’s policies for the last several years haven’t been fair to the U.S. and other non-China companies regarding theft of intellectual property, unfair conditions in partnerships and ambiguous laws. “We’ve just stood by and taken it as the cost of doing business in China, and the president has correctly stood up [to it],” he said.
Shapiro warned of the cyclical nature of a free-market system, saying an upcoming recession is likely, based on historical trends: “Why the president, when he’s riding high with the stock market and low employment, would jump up and try to put cold water on a good economy, I don’t understand it.” CTA has identified "only one" economist who thinks tariffs are a good idea: “Sadly, he works in the White House.”
On whether CTA envisions production moving to Taiwan as a result of the trade war with China, Shapiro said the organization feels an obligation to introduce companies to manufacturing opportunities in other countries. He cited an opinion piece he wrote in 2002 saying, “Don’t put all your eggs in the China basket.” Twenty years later, he said, "It’s just something you can’t switch on and off overnight.”