What does a potential Trade War mean for you as a consumer?

To catch anyone up who hasn’t heard, the U.S. and Chinese governments have doubled down in an escalating trade dispute, with the U.S. threatening to impose tariffs on up to $200 billion of imports from China. What does this mean to you as a consumer?  

Trump and Jinping

(Photo © Provided by Xinhua/Sipa USA/TNS) 

Well, potentially a lot. Granted, everything is still very much in a tussle right now. There’s no way to anticipate the outcome of all the threats being lobbed between the two countries, but here’s our take on some possible problems in the very near future...    

The fourth quarter is generally the biggest sales quarter for most retailers. For instance, they have already made projections and buying decisions for what will be on the shelves for Black Friday and Christmas this year. All this was done without the knowledge of these pending tariffs that now may very well be an issue of concern for them (and you). If items aren't imported before any possible tariffs go into effect, it will lead to higher prices, a cut in consumer spending and a reduction of consumer confidence. In other words, it could result in inflationary costs throughout the supply chain, ultimately paid for by you, the American consumer. Hence, that karaoke machine that your 13-year-old has been begging you for might cost 4X the amount you budgeted for this year. 

Kid Karaoke

In regard to textiles (the materials that make up anything from your clothing to the seat belts in your car), guess who is a top producer of cotton and other synthetic fibers like polyester and nylon?  

Ivan: “Um... I’ll take China for $200, Jaclyn.”

Me: “Ding, ding, ding! That’s correct!”

Jeopardy

China is actually the world leader in cotton production followed by India and the U.S. Cotton is an essential global commodity and the largest single source of fiber for apparel which is used by nearly every person on the planet on a daily basis. For millions of people in some of the world’s poorest countries, cotton is also a vital link to the international economy.

China Cotton Farmer

(Copyright © China Internet Information Center)
 

As far as I know, most finished apparel and footwear is currently off limits for tariffs but there are some raw textiles still being used as leverage. Frankly, nothing is off the table. This is an ongoing conversation and a tit-for-tat situation where anything is possible. That said, there could be some major backlash in the apparel industry on where and how they manufacture. If tariffs are in fact imposed on some of these major commodities or finished apparel items a company must 1) move their entire supply chain 2) absorb these additional costs or 3) pass these additional costs on to you, their beloved customer. Guess which one of these scenarios is by far the easiest and most likely?

Ivan: “Um, I’ll take scenario 2 for $300, Jaclyn.”

Me: “Sorry, no. The answer is scenario 3, Ivan." 

Jeopardy

The threat to the U.S. economy is less a question of “if” and more about “when” and “how bad.” Rest assured, tariffs on such a broad scope of products will inevitably raise prices of your everyday products, causing you to re-evaluate how and where you spend your money. While our nation plays a game of macroeconomic chicken, Trove will happily still manufacture in countries that won’t be directly impacted by this pending Trade War. We plan on providing you with apparel that is responsibly made, stylish and affordable, not only this holiday season, but many seasons to come!
July 18, 2018 by Jaclyn Dowdle