All told, the US tariff regime (USTR) placed new tariffs on $250 billion worth of Chinese imports in 2018. Of that, $50 billion had 25% tariffs placed on them and $200 billion had 10% tariffs, with a possibility of an increase to 25%. The tariffs were rolled out in phases. However, there have been, and will continue to be, lots of wrinkles in the process.
To our thinking, products that never made a list -some, like smartphones, are among the highest-value Chinese products the US imports – have the lowest near-term risk of being disrupted by trade tensions. Price jumps on these consumer products, we note, are ones average Americans would most likely notice. This is a signal to us that direct-to- consumer imports (though not necessarily their component parts) are as safe as products can be in this turbulent standoff.
We think it’s a fair to conclude these products will be relatively insulated as the trade war unfolds. It will be important to track which arguments win the day on which products, to help predict where tariff pressure might intensify in the near term and where America has “padded the list” with a willingness to pull back. The USTR has already exempted nearly 1,000 mostly industrial products from tariffs after industry pleas.
Jack Encarnacao and Raphael J. Lewis, research analysts. Mellon, a BNY Mellon company