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Consumers would feel bite from latest tariff plan

President Trump is planning tariffs on almost all goods from China that are not currently subject to them.
President Trump is planning tariffs on almost all goods from China that are not currently subject to them.Samuel Corum/New York Times

NEW YORK — President Trump announced another wave of China tariffs last week, essentially saying he would impose a tax on nearly all $540 billion in Chinese goods that come into the United States in a year. And this batch could really bite.

The administration carefully tailored previous rounds of tariffs to pinch businesses in ways that most Americans might not notice. But the 10 percent levy on $300 billion of imports that Trump announced Thursday, which would take effect Sept. 1, is expected to hit consumers where it hurts. From Apple’s iPhones to school supplies, a broad swath of everyday products are about to get more expensive.

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The latest move is likely to prompt companies to submit exclusion requests to be spared from the tariffs, cause the Federal Reserve to rethink its plans for interest rates, and inspire fresh retaliation from China that could compound Americans’ economic pain.

Here’s what to expect:

Until Sept. 1, the focus will be on the Office of the US Trade Representative for a final list of the Chinese products subject to the new tariffs. The items will come from a 76-page list published in the Federal Register in May after Trump said that he wanted to have more potential tariffs in his quiver if the trade dispute dragged on.

Not every item on the May list will necessarily face tariffs. The trade representative’s office held a week of hearings about the proposed duties and has received comments from businesses around the country hoping for exemptions.

If the tariffs do take effect Sept. 1, companies will have an opportunity to apply for exemptions. In previous instances, those seeking waivers had to explain why the tariffs would cause them “severe economic harm,” whether the product at issue or a comparable one was unavailable outside China, and whether the item was “strategically important” to China’s industrial policy.

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Earlier rounds of tariffs mostly focused on industrial goods, but the 10 percent levy announced Thursday is directed squarely at consumer items like clothes, toys, and footwear.

That is bad news for, among others, shoemakers and the stores that sell their products, said Matt Priest, chief executive of the Footwear Distributors and Retailers of America. Less than 1 percent of shoes are made domestically, and China is the source of 70 percent of the goods imported into the United States.

“We’re very concerned this will be a long-term cost baked into what consumers will pay,” Priest said, adding that he was not expecting exclusions to be made for footwear.

“Nearly every type of shoe is made in China, so there will be impact across the board,” he said. The only exceptions are some high-end leather shoes that are made in Europe.

With some consumer products, the supply comes almost entirely from China, said David French, senior vice president of government relations at the National Retail Federation. He cited umbrellas, electric blankets, and toys.

“Trump is feeling very muscular right now,” French said. “But the next round of tariffs will hit the president’s base particularly hard. The people who voted for him in 2016 felt economically vulnerable. The tariffs will cause job losses and higher prices for everybody but especially his base.”

The most prominent company bracing for the tariffs is Apple, which typically unveils new products every September.

In a letter in June, Apple urged Robert Lighthizer, Trump’s top trade adviser, not to proceed with any new tariffs. The company warned that such tariffs would hamper its global competitiveness and reduce its contribution to the US economy. Apple also said that new tariffs would tilt the playing field in favor of its global rivals.

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Trump has shown little sympathy for Apple. Last month, after the company filed 15 tariff-exclusion requests, he said they would be denied and the company should make its products in the United States.

Should the proposed tariffs take effect on Sept. 1, they’ll hit Apple’s phones, watches, MacBooks, iMacs, iPads, AppleTV, keyboards, and batteries.

Throughout the trade conflict, Beijing has demonstrated a willingness to respond to the Trump administration’s tariffs as proportionately as possible.

On Friday, China’s foreign minister, Wang Yi, said that “adding tariffs is definitely not the correct way to resolve economic and trade frictions.”

US officials were waiting to see how China planned to retaliate.

The trade imbalance between the two countries leaves China with limited options for imposing additional tariffs on imports from the United States. Beijing could introduce different kinds of barriers, including surprise inspections, license rejections for US companies, or a broadening of China’s “unreliable entities” list.

Analysts have also suggested that China could consider curbing exports of so-called rare-earth minerals to the United States, reinstate a tariff on US cars, or continue to shun soybeans from American farmers.

Throughout the yearlong dispute, China and the United States have continued to talk through their disagreements. China’s next move may be to give the silent treatment a try.

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The Federal Reserve was already laser-focused on the trade war before Trump’s latest tariff announcement. Officials lowered interest rates last week for the first time in more than a decade, partly because of the uncertainty stoked by the tariffs and the risk that they pose to the economic outlook.

Fed officials do not believe that the tariffs already in place have by themselves hurt growth significantly. But policy makers worry that the extended fight is causing businesses to hold back on investment, which could ultimately hurt the broader economy.

Trump’s choice to escalate the fight with China puts Jerome Powell, the Fed chair, and his colleagues in a difficult position. Their job is to keep the economy operating on an even keel. But by lowering rates, which can help keep growth steady and buttress the stock market, the Fed may inadvertently give Trump the cover that he needs to pursue his trade spats.

Powell has often said that the Fed would keep its focus on its two statutory responsibilities: sustaining maximum employment and stable inflation.

On the latter point, tariffs offer the Federal Reserve a surprise silver lining. They could drive inflation higher if companies raise prices on imported goods. The central bank has tried to coax prices up to, or even slightly above, its 2 percent inflation target — a goal it has undershot for years. Officials might seize on an opportunity to prove that they are ready to accept hotter price gains.

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