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Economy & Business

How A Trade War Between The U.S. And China Could Impact Consumers

ARI SHAPIRO, HOST:

The trade standoff between the U.S. and China escalated again today. Beijing announced new tariffs on $60 billion of U.S. goods. Here's how President Trump responded.

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PRESIDENT DONALD TRUMP: If there's a retaliation against our farmers and our industrial workers, our ranchers - if any of that goes on, we're going to kick in another $257 billion. And that'll be also at 25 percent. We don't want to do, but we probably will have no choice.

SHAPIRO: Beijing's actions today are a reaction to the Trump administration's announcement yesterday that the U.S. will impose a new round of tariffs on $200 billion of Chinese goods. This is all set to go into effect next Monday, September 24. To talk about the effect on retailers and consumers, David French of the National Retail Federation is here in our studio.

Welcome to ALL THINGS CONSIDERED.

DAVID FRENCH: Thanks, Ari.

SHAPIRO: Right now are retailers generally just afraid of what they see coming, or are they already seeing an impact on their costs and their profits?

FRENCH: Well, as you hear in the president's statement today, we're going to see the next $267 billion of tariffs announced. And that's a concern. So far, it hasn't shown up in prices for the most part. And we don't expect it to show up in prices until 2019. But it will hit consumers, and it will hit consumers in a very big way.

SHAPIRO: Where are consumers are most likely to see the impact?

FRENCH: The round of tariffs that was announced yesterday, it'll show up in things like handbags, bicycles, pet supplies, sporting goods, luggage, a range of things.

SHAPIRO: That's a really ragtag assortment of products there (laughter). We've heard companies say the big impact is going to be the disruption to their supply chains. Explain why that's such a big deal to companies.

FRENCH: So supply chains take a long time to develop. If you're a retailer, you source from China or any other country. It takes you months to develop the relationship, to get quality control right, to make sure the logistics work. These things don't get turned on and off with the flick of a switch.

SHAPIRO: So you're saying that if companies decide that, because of these Chinese tariffs, they might need to relocate their factories to some other country, they need a lot of lead time. And they might be doing a calculation about how long the Trump administration is going to be in office and whether these tariffs are permanent.

FRENCH: That may be so. The other big question is capacity. China's a large country with a lot of people, and they can manufacture a lot of things. That capacity doesn't exist everywhere in the world. In fact, it doesn't exist in most parts of the world. The final thing to think about is - if retailers or importers could have sourced anywhere else at the same price, at the same level of quality, they already would have done so.

SHAPIRO: There have been a lot of warning signs that this was going to happen. Are retailers calling you in a panic, or are they sort of shrugging their shoulders that this is what they were expecting?

FRENCH: Small retailers are very concerned. Some small retailers are telling us that they're likely to go out of business as a result of these tariffs because they can't pass on - they can't absorb the cost, and they can't easily pass it on to consumers.

SHAPIRO: What does the administration say when you raise these concerns with officials in the White House?

FRENCH: The administration understands our concerns. I think the administration is taking the view that this is a negotiating strategy and that they hope to get the Chinese to the table and force an agreement. Trade wars don't work out so simply, however. And we're very concerned that the escalation - both China and the United States are locked into positions that are very difficult to back away from.

SHAPIRO: And do you think this is going to get worse for your members before it gets better?

FRENCH: I think our members anticipate that the tariffs will be in place for a long time.

SHAPIRO: David French is with the National Retail Federation.

Thanks for coming into our studios today.

FRENCH: Thanks, Ari. Transcript provided by NPR, Copyright NPR.