The use of tariffs to force trade talks started slowly this past spring, getting more aggressive as we marched into the fall. Retaliation for unfair trade practices are now impacting the economy, but it’s an impact that so far remains modest.
Forecasters surveyed by the Wall Street Journal said the amount of imposed tariffs so far is relatively small and have yet to meaningfully affect the U.S. economy. Trade tensions themselves remain the biggest risk to the economic outlook.
What’s the impact at home? CNBC’s Ylan Mui reported that businesses paid 54% more in tariffs in September compared to a year ago. Meanwhile, exports hit with retaliatory tariffs were down 26% in September. U.S. companies report they are raising prices and changing supply chains to temper the impact, but warn investors that the picture could worsen next year.
Product exemptions increase
Back in March, the Trump Administration imposed sweeping tariffs on imported steel and aluminum and has since, selectively rolled out tariffs on a wide variety of products. Of the 5,745 products that have been tagged with tariffs as they arrive in the U.S. from China, a handful have been exempted from tariffs, including ibuprofen, barite, fluorine salts, and smartwatches.
A range of businesses from enormous energy companies to smaller suppliers of specialty parts have lobbied for tariff exemptions ever since the tariff wars began.
The takeaway
U.S. tariffs appear that they are here to stay, and trade tensions continue to escalate. There are, however, reports that both Trump and Chinese President Xi Jinping may be ready to come to the negotiation table. Any outcomes that lower tariffs, broaden market access and increase imports will lesson tensions.
The U.S. has trade deals with other key trading partners. If China comes to the table to negotiate, that could certainly ease fears and calm the markets. Without negotiations, analysts and economists warn the impact will spread, becoming more meaningful if corporate earnings slow into next year.
Source: Commerce Department, World Health Organization
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