Business Monday

In my view, nobody wins a trade war

In this file photo, U.S. President Donald Trump, right, chats with Chinese President Xi Jinping during a welcome ceremony at the Great Hall of the People in Beijing. “For all Americans, from the mobile phone in your hand to the shoes on your feet, chances are very high that you are wearing, driving in, flying in, reading from, typing on, watching, eating, or otherwise using something right now that was, at least in part, made in China. The international trade war affects us all more than we know, whether you buy from Amazon, Home Depot, Wal-Mart, or Macy’s,” says Peter Quinter of GrayRobinson.
In this file photo, U.S. President Donald Trump, right, chats with Chinese President Xi Jinping during a welcome ceremony at the Great Hall of the People in Beijing. “For all Americans, from the mobile phone in your hand to the shoes on your feet, chances are very high that you are wearing, driving in, flying in, reading from, typing on, watching, eating, or otherwise using something right now that was, at least in part, made in China. The international trade war affects us all more than we know, whether you buy from Amazon, Home Depot, Wal-Mart, or Macy’s,” says Peter Quinter of GrayRobinson. AP file | Nov. 9, 2017

On July 6, 2018, President Donald Trump initiated his trade war against China by adding a 25 percent tariff on some imported products from China. The list of products was expanded greatly to virtually all items imported into the United States from China with an additional 10 percent tariff. Moreover, Trump has proclaimed all additional tariffs will go from 10 percent to 25 percent effective March 1, 2019, if the Chinese do not agree to his demands for China to stop the purported forced technology transfers from American companies doing business in China, and theft of intellectual property from American companies.

As a customs and international trade attorney based in Miami for the past 25 years, and representing numerous U.S. importers of various products from China, I know the effect upon South Florida import companies was both direct and significant.

First, it is important to understand how momentous is the trade between the United States and China.

QUINTER
Peter Quinter chairs the Customs & International Trade Law Group at Florida-wide law firm GrayRobinson, and is chair of the American Bar Association's customs law section.

For all Americans, from the mobile phone in your hand to the shoes on your feet, chances are very high that you are wearing, driving in, flying in, reading from, typing on, watching, eating, or otherwise using something right now that was, at least in part, made in China. The international trade war affects us all more than we know, whether you buy from Amazon, Home Depot, Wal-Mart, or Macy’s.

Second, even though there is an additional 10 percent tariff on products imported into the United States from China, for the most part U.S. importers have cut their profit margins, or the Chinese suppliers have cut their sales costs to accommodate the American buyers. The more favorable exchange rate with the Chinese yuan has also helped alleviate the additional costs.

Third, should Trump’s tariffs go to 25 percent on March 1, most of those added costs will be passed on through the international supply chain to the American consumer. Some South Florida examples include companies which import: (1) kitchen appliances, (2) bathroom sinks and countertops, (3) commercial refrigerators and freezers that you see at your large supermarket chains, (4) water filters for ponds and fish tanks, and (5) mobile phone accessories. All five companies have explored sourcing their products from other countries such as Mexico, India, Vietnam and the United States.

While one company may change to source some of its products from Mexico, for the others the combination of price and quality is simply not competitively available from countries other than China. Hence, U.S. importers will continue to buy from China, and they will be forced to pass on Trump’s 25 percent extra tariffs collected by U.S. Customs and Border Protection to the wholesaler, and from the wholesaler to the retailer, and from the retailer to you and me as the American consumer. Higher prices lead to fewer purchases of everything from cars to kitchen appliances, which is part of the explanation why both the Chinese and the U.S. economy are slowing, the U.S. stock exchanges are spooked, and inflation is expected to increase in the United States in 2019.

To make matters worse, China has retaliated against Trump’s extra tariffs on Chinese products to the United States by adding its own tariffs on U.S. products being shipped to China. Our famous Florida lobsters were among products China levied an additional 25 percent tariff on, resulting in the loss of the largest market in the world for Florida lobster tails. China now gets its lobster from Canada. The major problem is that whenever Trump’s Trade War ends, it may have caused a permanent shift by Chinese companies and consumers to non-U.S. products.

Ultimately, nobody wins a trade war.

Peter Quinter chairs the Customs & International Trade Law Group at Florida-wide law firm GrayRobinson, and is chair of the American Bar Association's customs law section.

▪ This is an opinion piece written for Business Monday’s “My View” space in the Miami Herald. The views expressed do not necessarily reflect those of the newspaper.

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