Tariff Relief May Be On Way

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Tariff Relief May Be On Way

The Biden administration is considering rolling back some of the tariffs on Chinese goods, as it struggles to temper high inflation, said a New York Times report Wednesday.

However, the administration is not expected to completely eliminate the tariffs.

Industry groups have been calling on President Biden to lift the tariffs for months, but Biden and some of his advisors have sought to keep them as a bargaining chip with China and a deterrent to US companies manufacturing in China rather than the US.

But with the inflation rate hitting 8.6 percent in May, the administration is under increasing pressure to take whatever measures possible to reduce the higher cost of goods in the US, said the NY Times.

As we reported last month, a study by the Peterson Institute said rolling back the tariffs by 2/3rds on Chinese goods would return almost $800 a year to US households.

The NY Times, however said gains to consumers would be less than that as the reduction in tariffs may be smaller than 2/3rds (to keep some leverage over China).   Overall, the tariff roll back might reduce inflation by only a quarter of a percentage point, said the NY Times.

Tariffs have plagued car audio and electronicsNavTool suppliers since they started in 2018. Some suppliers pay tariffs of 25 to 30 percent on amplifiers and head units. Some pay a 7.5 percent fee on speakers and others pay 25 to 30 percent on Advanced Driver Assistance Systems (ADAS). The fees amount to tens of millions of dollars a year to the 12 volt industry.

The Consumer Technology Association is holding a seminar on Friday, June 17 to discuss the tariffs, which are set to expire in July.  The Fed is now conducting a comment period and will decide whether or not to renew them..

CEO of the National Retailers Federation (NRF), Matthew Shay said, “…we continue our call on the administration to repeal unnecessary and costly tariffs on goods from China to relieve pressure on American consumers and their family budgets.”

But retailers may not necessarily pass the cost savings from lowered tariffs onto consumers. The NRF told the NY Times that a tariff rollback may only prevent further increases at retail, but not cause prices to fall.

As to the aftermarket, we don’t yet know if car audio companies, who are strapped with rising costs for parts and shipping, would reduce the price of their goods in line with tariff relief.

The tariffs on Chinese goods have cost consumers an extra $81 billion in higher costs to date.  The tariffs amount to an added tax on $506 billion in goods of 16 percent on average.

 

 

 

 

 

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6 Comments

  1. YES – I vote for Ed too !!! Producing in America would eliminate many obstacles….. Lead time – Tariffs – Port issues – Longshoremen strikes – overall availability. Despite our cost of living increases at the moment, we all need to look at this from a broader perspective.

  2. Novel idea: to use the two thirds of the tariffs that would be reduced by the current administration, earmark that amount to fund increased Domestic production, expanding current production and encouraging new production here in the USA by subsidizing businesses. This would reinvigorate US business and domestic production, help improve our economy as a result, likely resulting in new jobs and helping the US to complete fairly with foreign imports (as tariffs were intended to do)
    Just a thought.

  3. Ed, I completely agree with all your comments.

    China is an existential threat to both our economy and national interests. The tariffs put in place during the previous administration leveled the playing field with American manufactures.

    Reducing or eliminating tariffs would only benefit China…

    So many people in this industry are short sighted and only worry about hitting their end of the month goal or making sales at any cost and fail to look at the big picture. If we don’t have a thriving manufacturing base and a good economy, we won’t have customers to sell to. Remember we aren’t selling anything that someone has to have.

    1. How many manufacturers brought their production into the US after tariffs were levied? How many American farmers lost their rear-end in retaliatory tarrifs?

      It’s not as simple as you’re making it seem.

  4. I agree with Ed. Any reduction on tariffs is not likely to be passed on to the consumer, at least not dollar for dollar. The industry has seen other costs increase such as raw materials, labor and shipping costs. A portion of any tariff reduction will likely be partially retained by them to help offset these costs. My guess is that most retailers stocked up on inventory over the last couple of years. If prices are reduced due to a reduction in tariffs, many retailers may see their margins squeezed while they work through the higher priced inventory they currently have in stock.

  5. Reducing Tariffs on Chinese product will have little to no effect on inflation. This is especially true if the “savings” were not passed on to the consumer. The industry should focus on production outside of China and especially in the United States if there is ever to be hope for controlling supply chain; not to mention national security. I recently reviewed a report offering that if every American spent just $64 more on USA made items for one year, it would create something like 200,000 new jobs. If 200 million Americans each refuse to buy just $20 of Chinese goods, that’s a billion dollar trade imbalance favoring the U.S.. Too many believe that once inflation is reduced, that we will see pricing return to pre-inflation times. That simply does not happen. Let’s work to find manufacturing elsewhere.

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