The latest whipsawing escalations in the United States’ trade war with China prompted a wide array of business organizations to warn over the weekend that U.S. consumers and workers would soon be caught in the crossfire.
It is now looking increasingly likely that few large U.S. companies will be able to sidestep the toll exacted by the new tit-for-tat tariffs that China and President Donald Trump rolled out Friday.
Many business leaders have kept a low profile as the trade war intensified, for fear of attracting Trump’s ire, and in the hope that the threats of tariffs could be negotiating tactics that will lead to some sort of trade agreement.
But with several tariffs already in place, and Trump staking out an even more aggressive stance Friday, many industries are reckoning with just how serious the situation has become.
Joshua Bolten, the president and chief executive of the Business Roundtable, an organization representing the leaders of the largest U.S. companies, said Sunday that many CEOs were already “poised right on top of the brake.”
“The risk is that everybody’s going to slam on the brake, and that would be a disaster,” Bolten said on “Face the Nation” on CBS.
Trump’s latest moves, Bolten said, could “disrupt trade and commerce in a way that would cause huge damage — not just to the Chinese economy, but to the global economy and the U.S. economy.”
The U.S. economy has so far been relatively resilient as the two sides battle. But several recent signs suggest that the tit-for-tat is beginning to broadly hit U.S. businesses.
The U.S. manufacturing sector, for instance, shrank in August for the first time since 2009, according to data released last week from the research group IHS Markit.
“America’s manufacturing workers will bear the brunt of these retaliatory tariffs, which will make it even harder to sell the products they make to customers in China,” the president and chief executive of the National Association of Manufacturers, Jay Timmons, wrote on Twitter on Friday.
While corporate earnings have held strong, several companies said last week that they were trimming their profit expectations as a result of the trade war.
On Friday, after China announced new tariffs and Trump ordered U.S. companies out of China, the Standard & Poor’s 500 index slid 2.6% and the tech-heavy Nasdaq composite fell 3%. After the markets closed, the president announced more tariff increases.
China said Friday morning it would impose new tariffs on $75 billion of U.S. imports. A few hours later, Trump announced on Twitter that he would be raising tariffs further on $550 billion of goods coming from China.
The biggest shock was from Trump’s statement that he was ordering U.S. companies to “immediately start looking for an alternative to China.”
The president said he had the power to do so under a 1977 law that has traditionally been used to deal with security and military threats.
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Over the weekend, some of Trump’s advisers tried to somewhat soften the blow of the president’s words.
Treasury Secretary Steven Mnuchin, speaking on “Fox News Sunday,” said Trump had the authority to make such a demand if he declared a national emergency but that he had not yet done so.
“I think what he was saying is he’s ordering companies to start looking because he wants to make sure — to the extent we are in an extended trade war — that companies don’t have these issues and move out of China,” Mnuchin said. “And we want them to be in places where they are trading partners that respect us and trade with us fairly.”
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There is still significant uncertainty on how many of the steps that China and Trump have announced will come into effect. The president has stepped back or delayed previous tariffs. And Sunday, the president said he was having “second thoughts” about the threats he made last week. But shortly thereafter, the White House press secretary, Stephanie Grisham, said the president’s regret was that he had not raised tariffs even further.
U.S. businesses have already begun taking steps to respond. The toymaker Hasbro said last month it was planning to shift a significant portion of its manufacturing from China to other Asian countries by 2020.
The U.S. toy industry is particularly reliant on Chinese factories, which account for 88% of its production, according to the National Retail Federation. But the figures are also large for other major portions of the retail industry.
David French, the senior vice president for government relations at the retail federation, said this weekend that companies were facing a difficult road because it could take years to make the kind of moves that the president has demanded.
“It’s impossible for businesses to plan for the future in this type of environment,” French said in a statement. “The administration’s approach clearly isn’t working, and the answer isn’t more taxes on American businesses and consumers. Where does this end?”
Trump has said he expects China to pay the costs of the tariffs he has imposed. But the direct costs of the tariffs are generally paid by the companies importing goods from China, who can then pass them along to consumers.
The Consumer Technology Association, which represents the largest electronics companies, has said that the tariffs are already costing the U.S. tech sector $1.3 billion a month and could raise the price of cellphones by $70 and the price of laptops by $120, on average.
JPMorgan Chase analysts recently predicted that the overall costs to U.S. families of the tariffs were likely to be between $1,000 and $1,500 a year.
“Tariffs are taxes on Americans, putting us on the wrong economic path and compromising our global leadership,” the president and chief executive of the technology association, Gary Shapiro, said Friday. “How much longer will our families, companies and economy be forced to bear the financial burden of this misguided trade policy?”
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China appears to be aiming its tariffs at parts of the United States where support for Trump is particularly strong, like farm country in the Midwest. China’s actions Friday, for instance, add 5 percentage points to the 25% tariff already paid on U.S. soybeans.
The president of the American Farm Bureau, Zippy Duvall, said after the latest announcements that “continued retaliation only adds to the difficulties farm and ranch families are facing and takes the situation in the exact wrong direction.”
China also added new tariffs to cars made in America. Tesla, as well as the German carmakers Daimler and BMW, are the most vulnerable to the additional levies. Six of the top 10 vehicle models exported from the U.S. to China, the world’s biggest car market, are from the two German brands, according to the forecaster LMC Automotive.
In private, auto executives say that, for now, the uncertainty is a greater concern than the potential material effect of the tariffs. One auto executive who spoke on the condition of anonymity said the industry was more worried that it cannot predict what might happen next or how bad it might get.
This article originally appeared in The New York Times.