Shapiro Worries About Impact of 25% Tariff Hit After First of Year, He Says

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 affect the holiday season.

“There’s all this talk about how the trade deficit with China has increased recently,” the association executive said, saying a large part of the increase is due to “companies trying to get stuff in before the 10 percent, and now before the 25 percent.” Bottom line, he said, “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 a CE 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 due to tariffs.

Jan. 1 is a “very critical date because 10 percent is a lot different than 25 percent,” said Shapiro. “Ten percent hurts; 25 percent makes companies reel. The pain throughout the industry is real -- and soon to the consumer and retail is real.”

Responding to our question whether CTA will sue the administration over the third tranche of tariffs that took effect Sept. 24 on grounds that the duties violate the 1974 Trade Act (see 1809170022), Shapiro told us: “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.”

Shapiro praised the administration, though, for standing up to China, saying most industry leaders think China’s policies for the past several years haven’t been fair to the U.S. and other non-China companies on 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,” 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 due to the trade war with China, Shapiro said the organization feels an obligation to introduce companies to manufacturing opportunities in other countries. He cited a commentary 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."

Innovate Celebrate Conference Notebook

LG will deliver its first-ever keynote address at CES, CTA Executive Vice President Karen Chupka announced Monday. LG Chief Technology Officer I.P. Park will deliver the pre-show keynote at 6:30 p.m., Jan. 7, in the MGM Park Theater. The executive will discuss artificial intelligence and its impact on consumers in the years ahead, said LG spokesman John Taylor. Other scheduled firsts at CES 2019 are exhibits from John Deere, Proctor & Gamble, JD.com and Raytheon, Chupka said. Exhibitor count is at some 4,500 companies in 20 categories, including 1,200 startups in the Eureka Park section. Chupka also highlighted AI, 5G, quantum computing and blockchain. A Smart Cities area will return in 2019, with more than 45 exhibitors.

Health and wellness devices were among the categories vying for Startup of the Year at the conference this week. Tivic Health’s ClearUp, a device designed to relieve sinus pain and congestion, uses “microamp” electrical current to alter nerve activity in target locations. The device, about half the size of a PC mouse, has a sensor on its tip that users guide around painful areas on the face to stimulate nerve branches and relieve pain. The device, with a target $200 manufacturer suggested retail price, is up for Food and Drug Administration approval, CEO Jennifer Ernst told us. Bone Health Technologies showed a device based on technology developed by NASA that uses mechanical pulses at a certain amplitude and frequency to stimulate bone cells for use by postmenopausal women experiencing bone loss. Recommended usage is three to five times a week for 20 minutes, said Nikhil Viswanathan, head-product development. The company completed its first clinical trial six months ago and the product is about a year from commercial availability, he said. Target retail price is $400.