Will global retail sourcing suffer if the U.S./China trade war escalates?
While President Trump feels that “trade wars are good, and easy to win,” history shows that they come with an excessive cost and he may be playing with fire. In the 1930’s when many countries put tariffs in place to protect their economies, global retail sourcing and trade fell dramatically, leading to unemployment and mass poverty.
In the big picture, the number of tariffs threatened on both sides so far is limited. In 2017 the US imported around US$3 billion in steel and aluminum from China, which represents less than 1% of total US imports of Chinese goods. Similarly, China’s retaliatory tariffs would also not affect a large amount of trade.
Economically, both the US and China are likely to lose if this posturing escalates into a real trade war. Despite President Trump’s comments that the US has “already lost the trade war,” there is still a lot at stake. Pushing up costs on Chinese parts required for US manufacturing will likely hurt American manufacturing and make retail consumer goods in the US and around the world more expensive.
Analysts predict that if this trade dispute escalates, it could reduce global economic expansion and hurt retail sourcing, from a projected growth of 3% in 2019 to 2.5%. Financial markets will also continue to fluctuate and suffer, as have individual companies such as Boeing, Ford, GM and Caterpillar. There would also be an impact on countries which supply components to China that use “Made in China” products, including Japan and South Korea. Countries, such as Germany, which make cars and other products in China which may be exported to the US, worry that their products will be hit by tariffs. For more information on how the retail industry will be impacted by the escalating U.S. and China trade war and for other retail sourcing related topics read the full Q2 Retail Sourcing Report, today!