A CNBC host, David Faber, recently admitted to being overwhelmed by the proposed list of new items the Trump administration has targeted for retaliation. Too bad Mr. Faber didn’t read my commentary from June 19, where I suggested the administration go after the “low-hanging fruit” — products with robust import numbers, but with less impact on ordinary Americans.
In my commentary, I reviewed three sectors: cosmetics, furniture, and lighting fixtures. Interestingly, these sectors are in the administration’s proposed list.
Cosmetics were a no-brainer — low impact combined with a big punch. As I had written, America imported a billion dollars of Chinese-made cosmetics last year. With new brands moving aggressively for shelf space in drug and cosmetic stores, this year’s imports should climb higher.
Increasing U.S. tariffs on imports of furniture made in China corrects a mistake made during the last multilateral round of trade negotiations (also known as “the Uruguay Round” of 1986-1994). Clearly, our negotiators did not foresee a time when China would become a member of the World Trade Organization (WTO). China became a WTO member in 2001, allowing that country to have duty-free access to the U.S. furniture market.
North Carolina’s furniture industry shrank. Club membership stores such as Costco and BJ’s sell all manner of Chinese-made furniture. Ditto for retail giants like Walmart and Target.
American furniture makers still exist. (I am the proud owner of an American-made sofa.) A 25 percent tariff on furniture from China would help level the playing field. U.S. firms must abide by environmental and health/safety regulations, but China’s standards are malleable. The standards cannot inhibit the Communist Party’s goals (e.g., overtaking the U.S. furniture market).
As for lighting fixtures, U.S. manufacturers exist, plus there are alternative import sources, notably Mexico and Canada. Although Chinese products are subject to tariffs ranging from about four to over seven percent it seems (again) the U.S. negotiators during Uruguay Round did not anticipate China becoming a WTO member.
Mr. Faber was right when he said the retaliation list was complicated. The Harmonized Tariff Schedule of the United States is extremely complex, as it covers imports of everything from live cattle to an Olympic medal won by an American athlete (the medal is duty-free).
However, as the Trump administration has discovered, a bit of research yields import categories that are not just low-hanging fruit. Instead, they’re ripe for retaliation.
