Personal Finance
Business

May 16, 2019

How Savvy Consumers Can Navigate Trade Wars

Last week's decision by the Trump administration, to increase tariffs to 25 percent on $200 billion worth of goods made in China, may present U.S. consumers with an opportunity.

Setting aside differing approaches to make China more accountable on fair trade, consumers may want to consider what to buy now before tariff-related price hikes show up on store shelves. The Los Angeles Times recently quoted a study noting that if the impact of last year's tariffs were annualized, the additional cost per household would be $419. If more tariffs go into effect this year, the price hikes could double.

Chemicals and aluminum are on the tariff list, and they affect the prices of many consumer goods. These items include $11.3 billion in furniture imports, $9.2 billion in auto parts and $6.6 billion in luggage.

Here is our list of goods that are likely to cost more as retailers pass on some or all of the increased tax to consumers:

  • Food – vegetables, seafood (tuna, halibut), sake, soy sauce, strawberry jam, frozen food, pears, meat, cereal
  • Smartphones, computers and computer parts - 55-inch flat screens are at historic lows now, so you may not want to wait until Cyber Monday in November if you're in the market for a new TV.
  • Clothing – plastic raincoats, leather shoelaces, knit fabric, reptile leather items, cotton fabrics
  • Paper goods and cleaning products
  • Sports gear and toys, including pet collars
  • Luggage - travel bags, backpacks, handbags
  • Housewares– faucets, locks, furniture, tools, appliances, light fixtures
  • Personal grooming products – soaps, makeup, deodorant, perfume
  • Antiques that are more than 100 years old - purchased by serious collectors

Some analysts believe it prudent to avoid purchasing washers and dryers now, despite the increase in tariffs, because U.S manufacturers raised prices last year by more than the equivalent of the tariffs. In other words, they are already overpriced.

Not affected by tariff price hikes are highchairs, infant walkers, carseats and other baby items.

Our View: The timing of these potential price increases depends, of course, on if - and how much - importers are willing to cut into their profit margins. And this may lead to a moderation of consumer behavior too. The overall message is clear: Stock up on Chinese-made goods now if you want to avoid future price hikes.

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