Source: Blog – Alliance for American Manufacturing
The Port of San Pedro in Los Angeles, Calif. Getty Images
A roundup in the huge swings in trade policy over the past few days.
What a year this week has been in U.S. trade policy.
Tariffs were on, then delayed! The stock markets went down, up, down, sell, buy, who knows what tomorrow will bring! “Don’t do this,” said the bond market. “We said don’t do this and we really mean it, and finally you listened!” Congress to President Trump: Boo, watch it! China to President Trump: We’ll see your tariff and raise you; rinse, and repeat.
Consumers were left puzzled: Should they buy, or should they wait?
Businesses too: Layoffs, expansions, confusion!
Wow.
Before we move into next week’s year, it’s worth summarizing some of the key actions and what to look for next, setting aside the rhetoric, social media posts, and hints dropped by Trump and his cabinet.
The next three months will be intense for Secretaries Bessent and Lutnick, and Ambassador Greer. That’s because the president tapped them to help him negotiate reciprocal trade agreements with a staggering number of nations. There is now, thanks to a Wednesday executive order, a 10% tariff on virtually every trading partner. Now the administration will need to decide what’s acceptable for each one of them. Among the options, I presume: voluntary import restraints, lowering tariffs, lowering non-tariff trade barriers, investing more (public and private) in America, eliminating industrial overcapacity, along with accepting the 10% tariff, or, a longshot I suppose: writing a big check to the U.S. Treasury. Countries who don’t come to the table or make an agreement may face steeper tariffs.
Beijing got whacked. Imports from China now face a 145% tariff (20% based on the fentanyl emergency plus 125% based on reciprocal and retaliatory measures). Keep in mind there were $449 billion worth of imports from China last year. That number is likely to drop steeply in 2025. Will consumers face higher prices? It’s possible, but not likely to the extent that critics would lead you to believe. For instance, Apple quietly scaled up production in India — shifting away from China — and airlifted 600 tons of iPhones to the U.S. this week. It not only beat 145% China tariffs but also the India tariffs, which were lowered from 26% to 10%. Just about every business that sells in America is looking to source outside of China now or, at the very least, restructure contracts to lower costs. Other businesses that buy imports wholesale and sell them retail can absorb some of the cost. And consumers themselves have been stockpiling some goods and may also delay purchases until any price hikes come back down.
SHEIN and Temu finally must face the music. The fast fashion and ultracheap goods purveyors from China have relied on a massive loophole in trade and tariff laws to gain a strong direct-to-consumer foothold in the United States. That loophole, known as the de minimis exemption, has allowed these companies to connect with consumers who crave fast fashion and the latest gadgets at too-good-to-be-true prices with just a tap on a smartphone. But there’s a bottom line: These companies avoid paying tariffs, which is unfair to their competition in the U.S. market that pays tariffs on their imports. No more. These de minimis shipments from China will now face either a 120% tariff or a $100 per package fee (increasing to $200 on June 1). De minimis for other countries will be adjusted later. I wonder if SNL will now parody the downfall?
Pharmaceuticals know that sectoral import tariffs are coming. Novartis just announced plans to invest $23 billion, open five factories in America, and expand production at three others. That follows several other high-profile announcements that Bloomberg summarized thusly:
Novartis joins a growing number of multinational drug companies to announce investments in the US this year. Eli Lilly & Co. said in February it would spend at least $27 billion on four US plants within the next five years. In March, Merck & Co. promised to invest $8 billion domestically by 2028, while Johnson & Johnson pledged more than $55 billion over the next four years.
Steel, aluminum, and auto/auto parts sectoral 25% tariffs are already in place, except for USMCA-compliant autos and auto parts. This has already led to some companies announcing production increases, others announcing temporary layoffs, consumers rushing to auto dealers, and companies like Ford and Stellantis offering generous discounts for a few more weeks. Also be on the lookout for possible sectoral tariffs or other measures on copper, lumber, and agricultural products down the road.
Will there be a fee for Chinese-made cargo vessels that dock at American ports? We should know by April 17, the statutory deadline for establishing relief measures via the Section 301 shipbuilding case filed last year by the United Steelworkers and other unions. This week the Trump administration unveiled a sweeping Maritime Action Plan that includes the development of a trust fund, training programs, demand-side incentives, and legislation to boost shipbuilding capabilities in America. USTR has proposed a docking fee structure for all Chinese-built cargo ships that dock at American ports. The proposal generated support from some shipbuilders, unions, companies in the supply chain, and unsurprising opposition from shipping interests, importers, and China. It will be interesting to see where USTR lands on the fee, which could raise significant revenue to capitalize a shipbuilding trust fund.
Enjoy your weekend, and remember: Wait for the actual policy rather than relying on the pundits for your trade and tariff information. While you are at it, stock up on some essential that are Made in America and don’t face tariffs.
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