Companies are scrambling to respond to President-elect Donald Trump’s “beautiful” tariff proposal. The administration may seek to enact it early in its second term.

Proactive steps companies are taking to avoid expected price increases include stockpiling inventory in U.S. warehouses and completely eliminating China from supply chains and reducing imports affected by increased tariffs. This includes considering whether there is a need to increase the price of goods, and the costs would be passed on to consumers.

Free trade skeptics say the companies’ preemptive actions are clear evidence that President Trump’s proposed tariff hikes have already achieved their intended effect of pressuring retailers to exclude China from their supply chains. He claims to be giving signs. But some policy experts believe higher tariffs would be a regressive tax on lower- and middle-income U.S. households and exacerbate inflation, according to retailers and economists interviewed by the Daily Caller News Foundation. I’m warning you.

During the campaign, Trump proposed universal policies. customs duty Up to 20%, 60% or more of all imported goods imported into the United States. customs duty Applies to all imports from China. The Wall Street Journal reports that President Trump is considering Robert Lighthizer, a former trade representative during his first term and known as a supporter of high tariffs, to be his trade czar during his second term. Ta. reported. (Related: ‘Why not?’: President Trump tells Logan he will use tariffs to make America ‘richer’ by eliminating income tax)

President Trump: “To me, the word tariff is a very beautiful word, because it can save our country, really…I saved the steel industry by putting tariffs on the steel that China came in and dumped. … They had a committee in charge of anything that had to do with money. we… pic.twitter.com/jj88zenMRP

— Trump War Room (@TrumpWarRoom) October 2, 2024

“Mitigation strategies to reduce impacts”

Jonathan Gold, vice president of supply chain and tariff policy at the National Retail Federation, said in an interview with DCNF that companies are taking measures such as stockpiling goods in U.S. warehouses to aggressively counter expected price increases resulting from higher tariffs. He said he was taking pre-emptive measures. .

“They are considering various mitigation strategies to reduce the potential impact from tariffs,” Gold told DCNF. “One of those strategies is “Start looking at the possibility of bringing in cargo and getting products in sooner rather than later, ahead of any tariffs that President Trump may impose.”

Importing goods into the U.S. ahead of schedule will likely incur additional costs for retailers that will be passed on to consumers, but tariffs of more than 60% on imports from China have been implemented. Waiting to import goods from China would be significantly more expensive, the paper said. gold.

Recent NRF study It predicted that President Trump’s proposed increased tariffs on consumer products would cost American consumers an additional $46 billion to $78 billion annually.

“Tariffs are taxes paid by U.S. importers, not by foreign countries or exporters,” Gold said in a press release accompanying the investigation. “This tax ultimately comes out of consumers’ pockets through higher prices.”

Decoupling from China

Mark DiPlacido, policy advisor at American Compass, said part of the rationale for President Trump’s tariff proposals is to force manufacturing jobs back to the United States and encourage companies to completely exclude China from their supply chains. It’s about applying pressure.

“I hope that in addition to stockpiling, we are also looking at actually relocating the supply chain out of China and ideally back to the United States,” DiPlacido told DCNF.

“For a long time, framing was the best way to just increase trade flows, regardless of the direction of trade flows. What that has done over the last 25 years is manufacturing flows, factory flows, employment flows, Especially the solid middle-class job flow in the U.S. and around the world,” DiPlacido added.

But Gold said that even though companies have taken further steps to diversify their supply chains over the past decade, moving production entirely outside China is not feasible for some retailers.

“Gold acknowledged that making these changes takes time and that not everyone is capable of it. “Nobody has [production] China’s ability to do so. It is difficult to find it in multiple countries. And it’s not just about capacity, it’s about skilled workforce as well. ”

Additionally, companies that move production outside of China to avoid the 60% tariff on imports from China will still be subject to a flat 20% tariff if they move their supply chain to the United States, gold, or a country other than gold. may be imposed. Several economists told DCNF.

“They’re talking about tariffs on imports that don’t have domestic producers to switch to,” Clark Packard, a trade policy researcher at the CATO Institute, told DCNF in an interview. “For example, why would we impose a tariff on coffee if we don’t make it in the United States?”

“Who are we trying to protect?” he added.

Some economists are pessimistic that the president-elect’s planned tariff hikes will eventually lead to jobs returning to the United States from cheaper labor markets overseas.

“What we actually saw in the 2018-2019 trade war was a reduction in manufacturing output and employment due to tariffs,” said Roberts, senior economist and director of research at the Tax Foundation’s Center on Federal Tax Policy. Erica York said in an interview with DCNF. . “It played out as every economist predicted: higher costs for American consumers, lower production, lower incomes for American workers, and harmful foreign retaliation.”

Packard told DCNF that the president-elect’s proposed tariff hikes would save or create savings by protecting domestic industries that could benefit from higher tariffs on foreign competitors, such as U.S. steel and solar manufacturing. He said more jobs could be lost than lost. (Related: ‘He saved the steel industry’: Steelworkers in key battleground states explain why they support Trump)

“This is disproportionate. It’s a cost that is passed on to the entire economy to protect a small portion of American jobs,” Packard said. President Trump imposes 25% tariff on imported steel enacted U.S. steel industry employment increased slightly during the first administration, Packard said, but retaining or creating jobs cost about $650,000 and required more expensive steel purchases. Jobs in other sectors that were forced to do so are likely to have been lost.

“Bipartisan recognition”

Although tariffs could force companies to raise prices on goods they import into the U.S., DiPlacido said President Trump’s proposed tariff increases would reduce U.S. dependence on China for a variety of strategic goods and consumer products. He defended the situation as essential to solving the problem.

“We need to be able to manufacture a wide range of goods in the United States, and we need the job security and economic security that a strong manufacturing industrial base provides,” DiPlacido said. “That will be important for any future conflicts or emergencies the United States may have with China or other countries.”

Citing Trump’s overwhelming electoral record, DiPlacido also believes Trump has a “mission” to implement the tariff proposals he proposed during the campaign.

“There is something like bipartisan recognition on this issue. Even the Biden administration maintained nearly all of President Trump’s tariffs,” DiPlacido told DCNF. “I think he has a political mission, but it’s often difficult to get there.”

But some economists question whether thousands of dollars are really needed. projected The costs that U.S. households will have to pay as a result of these tariff hikes could spark a political backlash that has so far eluded the relatively similar trade policies of Presidents Trump and Biden. .

“The voters Understandably, we’re pretty upset about rising prices and inflation,” Packard told DCNF. “We are talking about using tariff tools to increase relative prices.”

“Tariffs as a whole are regressive taxes,” Gold told DCNF. “Without a doubt, low- and moderate-income consumers are being hit the hardest.”

Gold said retailers expect demand for consumer products to decline as a result of President Trump’s tariff proposals.

Incoming Senate Republican leaders have also been highly critical of President Trump’s tariff hike proposal.

“It’s worrying to hear that they just want to put a flat 10% or 20% tariff on everything that comes into the United States,” said Sen. John Thune, R-South Dakota, the Senate Republican leader. said During a panel discussion on agricultural policy in his home state in August. “Generally speaking, it leads to an increase in inflation. ”

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