American businesses are convening in Washington this week to persuade the Trump administration not to impose an additional $300 billion in tariffs on Chinese goods.
The trade war between China and the United States that began last year has already caused problems for Illinois farmers, spirits distillers and businesses in other industries.
Morning Shift checks in on what effect the existing tariffs have had on Illinois and what a new round could mean for workers and businesses in the state with Cecile Shea, senior fellow on global security and diplomacy at the Chicago Council on Global Affairs.
What is the status of U.S. tariffs on China and vice versa?
Cecile Shea: We’ve had about $250 billion of tariffs on Chinese products for nine or 10 months now. Some of them are at 10%, some of them have been at 25%. All along, he’s been threatening to add more tranches to these tariffs. And he again is threatening to basically put tariffs on every single item imported from China.
Now up until now, the tariffs have been on what are sometimes called intermediate products, so these are components that go into other products in the U.S. As an example, some of the major wholesalers of fabric in the U.S. have been sending letters out to their companies saying, ‘We had to raise prices 10 or 15% last fall. We hated having to do that. But now with the president’s announcement that he’s going to increase tariffs on fabric to 25%, we’re sorry, we’re going to have to raise prices again.’
On China’s response thus far
Shea: That’s the other half of this. Really, a lot of people in Chicago and throughout the Midwest are double losers because not only are the prices on certain items going up or are about to go up, but also China has retaliated by putting similar sanctions where it hurts the U.S. So farm products, for instance, is one. Harley-Davidson motorcycles is another one. They’ve threatened to put massive tariffs on Boeing airplanes, which would hit Chicago very hard.
I was in Iowa last week and in western Illinois, and farmers are really hurting there. They really need this aid that’s coming from the federal government, but it’s not going to be enough, especially coupled with the bad weather that they have had now for two years. They’re really hurting because they cannot sell their soybeans to China because the Chinese importers, of course, don’t want to have to pay the 25% duty on them. So instead, they’re buying them from Argentina and Brazil and other countries.
On the Illinois companies hit hardest by the trade war
Shea: The companies and the businesses that are being hurt are the small ones. The countries being hurt, incidentally, are the poorer countries.
Let’s look at these upcoming tariffs. The president is threatening 25% tariffs on children’s clothing and on toys. So if you’re Walmart or Target right now, you’ve sent people to China and you’re working with manufacturers in China … but if you’re a mom and pop store, you can’t do that. You don’t have anybody that you can send to China. You don’t have access to capital to pre-buy now. You may not even have the time to figure all of this out.
So really this is hurting the small farmers and the small businesses disproportionately to the large conglomerates.
Jenn White: Talk a little bit more about the industries in Illinois that are feeling the pinch right now.
Shea: Other than agriculture, and agriculture is really hurting … some manufacturing has already closed up shop. There was a manufacturer of construction nails that just shut down because they couldn’t afford the high steel prices about a year ago. We’re seeing auto manufacturing starting to slow down because steel has gone up in price to such a huge degree.
On the long-term impact on Illinois’ economy
Shea: Statistics are just starting to come out, and it’s pretty clear that manufacturing took a huge dive across the United States in May. The New York Fed released its figures yesterday, and it was the single largest drop in manufacturing predictors in the history of them doing those reports. So it’s significant. We’re waiting to hear what some of the reports from the Midwest are going to come out.
But I just want to emphasize that there are 100,000 small businesses that are starting to pay the price because capacitors cost more, because fabric costs more, because getting children’s clothing is about to cost more. And that’s a drip, drip, drip that is going to become stronger if this new tariff regime goes into effect.
This interview has been edited for brevity and clarity by Stephanie Kim. Click the “play” button to hear the entire conversation.
LEARN MORE: Businesses Plead To Stop More China Tariffs. They Expect To Be Ignored. (New York Times 6/17/19)