Georgians, from builders to baseball players, will pay the price for increased tariffs on Chinese goods imposed Friday by President Donald Trump.
The president’s move, as the two countries negotiate a trade agreement, means the 10% tariffs imposed last year on $200 billion in Chinese imports from power tools to leather products is going up to 25%. Most of the increase will affect basic materials, but Trump has also threatened to put new tariffs on a range of other Chinese consumer products, such as clothing and toys.
Georgia's Senator David Perdue, speaking on CNBC's Squawk Box Thursday, defended Trump's actions as necessary to force China to open its markets to U.S. goods and services and change trade policies, which he said have been unfair and broken World Trade Organization regulations.
“We will suffer some pain inside this country for a while, but this is the right thing to do long term to get China to stand up and do the right thing relative to our trade relationship,” Perdue said.
Two things helped blunt the consumer cost of the initial tariffs imposed last year. Georgia businesses renegotiated prices with Chinese suppliers, and China devalued the yuan.
China’s currency dropped about 10% in the last 18 months, said Rajeev Dhawan, the director of the Economic Forecasting Center at Georgia State University.
“Did you see prices go up in the storefronts? No,” he said.
China will have a difficult time making another 15% adjustment.
“Then people will start seeing a problem,” and prices will rise, if the countries don’t come to a trade agreement, he said.
Increased steel prices have added to building costs, and contracts are trying alternatives, such as reinforced concrete, said Kenneth D. Simonson, chief economist for the Associated General Contractors of America.
Georgia’s robust boat-building businesses — they employ 15,000 — are already squinting through some pain from the first round. China supplies fiberglass, electronics and steel products down to tiny ball bearings. Pontoon boat builders have been particularly hard hit, and raised prices.
“You have to look at benefits you might receive as to what might be lost on the front end. That is extremely hard to quantify,” said Ann Baldree, senior vice president of Chaparral Boats in south Georgia.
A number of Georgia companies including Haverty’s Furniture and HD Supply renegotiated prices with Chinese suppliers to lessen the effects on consumers.
Haverty’s Executive Vice President Richard Hare said the company lost some business when some Chinese furniture builders stopped production rather than pay the tariffs. Haverty’s, like many U.S. businesses, has begun looking for new suppliers in other countries.
Others such as Coca-Cola pushed up prices to retailers in part because of tariffs on metals. Coke, which needs aluminum for cans, left it up to retailers to pass along the cost or not.
The new round of tariffs has Georgia retailers flustered.
“Numerous industries that retailers rely on to manufacture and produce their merchandise will be hit with increased costs of up to 25%,” said Thomas Beusse, executive director of the Georgia Retailers Association. Effects could range from reducing or canceling expansions, cutting jobs or passing costs on to consumers.
A second negative impact of the trade war will be the retaliatory tariffs China promised is coming. Last year it targeted Georgia’s pecan, peanut and soybean farmers, among others, cutting business significantly. Georgia has grown as an international trading partner, which boosted the state economy but also made it vulnerable to this trade war.
“Georgia is the 11th-largest exporting state, and 7th-largest importing state,” said Jeffrey Humphreys, director of economic forecasting at the University of Georgia. “Therefore we are extremely vulnerable to any stepback in globalization.”
China will lose business long term, as companies look elsewhere for goods, but American consumers will pay the bill immediately, he said.
Craig Brooks, the store manager at Smyrna’s Jonquil Sporting Goods, watched prices rise on high-end leather gloves, some from China, which can cost more than $300.
“They’ve gone up little bit in price, but it hasn’t affected sales,” he said.
How about bats? Where do they come from?
“That’s a good question,” he said before walking away from the phone to check.
When he returned he said, “Almost everything I saw was made in China. One was made in the U.S.”
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