Beijing Review – August 15, 2019

http://www.bjreview.com AUGUST 15, 2019 BEIJING REVIEW 35

BUSINESS

600 companies and trade associations re-
cently signed a letter pleading with the White
House to dismiss the proposal for additional
tariffs. UBS bank estimated the new tariffs
could mean $40 billion in lost sales, and
may force the closing of 12,000 retail stores
across the U.S.
Essentially, retailers know that they have
only two ways forward. They can take losses
on sales or pass the cost onto U.S. consum-
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retailers are in the game to become non-
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Costly for consumers

So how much in cost are we talking? And
can’t retailers and consumers split the cost?
A lot. And no.
When a retailer absorbs 7 percent of a
10-percent tariff and passes the remaining 3

Michael Zakkour is vice president of China/Asia Pacific

strategy and global digital practices at consulting firm

Tompkins International; John L. Ghiorso is CEO of Orca

Pacific

Copyedited by Madhusudan Chaubey

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percent onto the consumer, they are taking

the maximum cut possible to keep their pric-

es competitive. If that tariff increases to 25 or

35 percent, the retailer will lack the room to

take on a proportionate cut. Consequently,

the consumer’s share will increase from 3

percent to a staggering 18-20 percent.

Staying with the dehumidifier example,

your standard $150 appliance from Walmart

could end up costing $177-185.

While only a $27-increase on dehu-

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U.S. family, the same outcome multiplied

over thousands of products purchased

daily will, without a doubt, be felt by the

average U.S. household. That’s why, as

many others have suggested, the pro-

posed tariffs function as a steep tax on U.S.

consumers.

As the whole of the U.S. economy winc-

es in nervous anticipation, it’s not crazy to

wonder whether these outcomes could

knock the U.S. into a recession. After all,

many economists deem the U.S. overdue

for a dramatic economic downturn. Worst

of all, history has taught us that lagging

economic indicators delay the full impact

of catastrophic effects until long after

they are easily fixable. With the potential

for a sudden and prolonged strain on the

U.S. economy, the new proposed tariffs

on China should be seen as nothing more

than what they actually are: a lose-lose-lose

situation. Q

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