Trump Aims Tariffs At Chinese Companies, But Other Firms Will Also Feel The Pain

Jul 5, 2018
Originally published on July 23, 2018 2:02 pm

Updated at 5:32 a.m. ET Friday

In imposing tariffs on $34 billion worth of Chinese imports that took effect Friday, the Trump administration says it is hoping to strike a blow against long-standing abusive trade practices by the Beijing government.

But for now, the blows are threatening to land hardest on non-Chinese companies like New Jersey-based Snow Joe/Sun Joe.

The company, which sells some 700 home and garden products, is expected to face tariffs on the tillers and cultivators it makes in China and imports into the U.S., says CEO Joseph Cohen. The cost to the company is likely to be significant, he says.

"We're going to do everything in our power to maintain our cost to our retailers, and ultimately the retail price," Cohen says.

"But 25 percent's a really big number," he says, referring to the amount of the tariff. "Sooner or later unfortunately the price will ultimately go up and consumers will pay more for it."

The company's plight illustrates one of the unintended consequences of the tariff war now brewing between the United States and its trading partners: Most of the companies that will feel the tariffs' impact are not Chinese but foreign firms that do part of their manufacturing in China, says Mary Lovely, an economics professor at Syracuse University and nonresident senior fellow at the Peterson Institute for International Economics.

A lot of manufacturing these days relies on vast, interconnected supply chains that may cross borders several times, Lovely says.

For example, the United States manufactures elevators using some low-tech parts that are made in China, which are then brought back into the U.S. for final assembly and sold all over the world, she says.

Much of the public knows about the vast number of consumer goods now imported from China into the U.S., such as televisions and clothing, Lovely says. But, she notes, "60 percent of all the trade between the U.S. and China actually takes place through these multinational supply chains."

For a while at least, the cost of the tariffs will be hidden inside these supply chains. But consumers will eventually feel their impact through price increases.

Take Mabuchi Motor, a Japanese company that sells small motors used in auto, medical and consumer products. Its products are decidedly low-tech, such as motors that roll down car windows.

Mabuchi makes these motors in China and then sells them to automakers and medical-device companies in the U.S. and elsewhere.

Now, Mabuchi is facing steep tariffs on the parts it imports into the United States from China, says Anne Hoef, treasurer of Mabuchi's Michigan-based distribution arm.

While the company could avoid the tariffs by relocating its manufacturing facilities outside China, doing so would take years, Hoef says. "That's just not practical right now."

So for now it will have no choice but to pass on part of the extra cost to its customers — the automakers and medical-device makers that buy its motors.

"And they're going to simply pass that cost on to their customers, which in many cases is the U.S. consumer," Hoef says. "This isn't going to hurt China. This is going to hurt us."

Copyright 2018 NPR. To see more, visit http://www.npr.org/.

MARY LOUISE KELLY, HOST:

Tomorrow the Trump administration is imposing tariffs on $34 billion worth of Chinese imports. As a result, hundreds of products could become more expensive. The administration says it is targeting unfair trading practices by Chinese companies. But according to researchers, most of the companies affected by the U.S. tariffs aren't even Chinese. NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: Joe Cohen started designing power snow shovels in high school. He was soon selling them on the home shopping channel QVC, where his products became something of a fixture.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED PERSON: This has got to be the most easy, convenient - by the way, he'll show you how little it weighs in a second - snowblower to own and use.

ZARROLI: Today the company Cohen started called Snow Joe sells 700 different home and garden products. They're designed in New Jersey but mostly made overseas.

JOE COHEN: I mean, there's just no other alternative. If there was a source in - you know, somewhere here absolutely it makes sense to produce it. But there are none.

ZARROLI: Some of the products Cohen sells are made in China. They include garden tillers and cultivators, which are included on the Trump administration's tariff list.

COHEN: We're going to do everything in our power to maintain our cost to our retailers and ultimately the retail price, but 25 percent's a really big number. Sooner or later, unfortunately, the price will ultimately go up, and consumers will pay more for it.

ZARROLI: The company's plight underscores the unintended consequences of the tariff war between the United States and its trading partners. Mary Lovely, professor of economics at Syracuse University, says U.S. tariffs may be aimed at China, but in a recent report, she said, most of the companies that will be hurt are not Chinese. That's partly because of how intertwined global supply chains have become. For example, Lovely says, other countries still buy elevators made in America.

MARY LOVELY: The U.S. is able to make elevators successfully partly by importing some of the less skill-intensive parts and then assembling those elevators here in the United States and then exporting those elevators to the rest of the world.

ZARROLI: Lovely says a lot of the items targeted for tariffs are parts and pieces of products that are imported from China and assembled into finished goods in other countries.

LOVELY: Sixty percent of all the trade between U.S. and China actually takes place through these multinational supply chains.

ZARROLI: Because the tariffs are hidden inside these complex supply chains, consumers won't see price increases right away, but they will eventually. Mabuchi Motor is a Japanese company that makes small motors used in autos and medical devices. The motors Mabuchi makes in China are on the U.S. tariff list. Anne Hoef is treasurer of the company's U.S. distribution arm. She says Mabuchi will have to pass on the cost of the tariffs to its customers, the auto and medical companies that it sells to.

ANNE HOEF: They're going to simply pass that cost on to their customers, which in many cases is the U.S. consumer. This isn't going to hurt China. This is going to hurt us.

ZARROLI: Hoef says the company could leave China and find another country to make motors in, but that would take a while.

HOEF: I mean, this could take two to three years before we are up and running with a new line. That's just not practical right now.

ZARROLI: And even if it wanted to relocate, it's not clear where Mabuchi could go. The company also uses a factory in Mexico for some of its manufacturing. It can bring the products it makes there into the United States because of the North American Free Trade Agreement. But with President Trump renegotiating NAFTA, it's not clear how long it will be able to use that plant either. Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.