Americans' face a significant increase to the price of imported items. Photo / Getty Images
Americans' face a significant increase to the price of imported items. Photo / Getty Images
The L.O.L. Surprise! House, a three-story doll house with a working elevator and heart-shaped swimming pool, was one of last year's best-selling holiday toys.
Now it's one of millions of items caught in the middle of the Trump administration's growing trade war with China. If the president's newest tariffs take hold, the US$199 ($304) doll house will soon cost $250, according to its manufacturer.
"There is no question: We have to raise prices, which means consumers are going to be paying 30 per cent to 40 per cent more for toys," said Isaac Larian, chief executive of MGA Entertainment, which makes such popular brands as Bratz, Little Tikes and Poopsie Slime Surprise!
"We're in peak holiday season - the orders are in, factories are manufacturing toys and getting ready to ship them out right when these tariffs are going to hit."
President Donald Trump tweeted Thursday that he would impose a 10 per cent tax on $300 billion worth of Chinese imports - including T-shirts, toys and televisions - beginning Septemer 1.
While consumers have been largely shielded from earlier tariffs, the newest round would raise prices on just about everything Americans buy. More than 60 per cent of the affected items are consumer goods, according to an analysis by Goldman Sachs.
That means the price of toys will rise by about 17 per cent, shoes by 8 per cent, clothing by 5 per cent, and furniture and TVs by 4 per cent, according to a report by the Trade Partnership, prepared for the National Retail Federation. The cost of laptops and tablets, meanwhile, is expected to rise $50 to $120, while smartphones will cost an extra $70, according to the Consumer Technology Association.
Executives at Columbia Sportswear say they have already told retail customers to expect higher prices in the coming months. "Some prices will go up - we don't know exactly which ones or by how much - but what we know is there will be increases across the industry," said Peter Bragdon, the company's chief administrative officer.
Retailers say the timing couldn't be worse. The tariffs are scheduled to go into effect just as they begin their fourth quarter, a make-or-break period that often determines whether they have a profitable year or not.
The industry has faced its share of turmoil in recent years. The rise of online shopping, coupled with growing competition, has driven down profits and led to dozens of retail bankruptcies since 2017.
Retailers have already announced plans to close more than 7,500 stores this year, and analysts say new tariffs could lead to thousands of additional closures and job losses.
"These tariffs will only threaten US jobs and raise costs for American families on everyday goods," David French, senior vice president for government relations at the National Retail Federation, said in a statement. "The tariffs imposed over the past year haven't worked, and there's no evidence another tax increase on American businesses and consumers will yield new results."
Staff at the Amazon Swansea fulfilment centre process orders. Photo / Getty Images
He and others warned that raising prices on everyday goods could have a chilling effect on the overall economy. Consumer spending makes up roughly 70 per cent of the US economy, and the retail industry accounts for one-fourth of the country's jobs.
In all, American shoppers would pay $4.4 billion more for apparel each year the tariffs are in effect, $2.5b more for shoes, $3.7b more for toys and $1.6b more for household appliances, according to the Trade Partnership. Those increases come on top of earlier tariffs, which had already imposed a 25 per cent tax on $250b worth of Chinese imports as varied as suitcases, garden tillers and dog sweaters.
"We survived the Great Depression, we survived the Second World War, but what we're facing now - it's hard to believe we're even in America anymore," said Lance Ruttenberg, chief executive of American Textile Company in Pittsburgh, which makes bedding for brands like Sealy and Tempur-Pedic. "This is debilitating for businesses and for consumers."
Companies of all sizes are likely to feel the pinch of higher prices - and slowing demand. Sales of Apple iPhones, for example, could fall by up to 8 million units in the coming year if the company passes on a 10 per cent price hike to consumers, according to Dan Ives, an analyst for Wedbush Securities. He said Apple, which sources the majority of its products in China, has become a "poster child" for the trade war.
"The tariff news throws a mini wrench in iPhone demand, which will weigh on shares," Ives wrote in a Thursday research note. "These latest tariffs could significantly increase the cost of iPhones globally."
...during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already Tariffed at 25%...
Apple's stock price has fallen more than 5 per cent since Trump's Thursday afternoon tweet. Shares of Best Buy are down 9 per cent, while Target's stock is down about 5 per cent.
Business owners say the uncertainty of tariffs has made it difficult to prepare for the upcoming holiday rush.
At the Jolly Christmas Shop in Loganville, Georgia, owner Meghan Nichols finalized holiday orders in May to avoid any surprise price increases. But come spring, she says she will have no choice but to mark up just about everything she sells.
"Our vendors are already raising prices for next Easter," she said. "There is going to be a huge impact."
Rick Woldenberg, the chief executive of educational toy company Learning Resources, has an entire holiday season worth of toys en route from China that could soon cost him 10 per cent more. The company, which is based in Vernon Hills, Illinois, has been manufacturing its toys in China for decades to keep costs low for American shoppers. But soon, he says, he may be forced to raise prices - at the worst possible time of year.
"It's amazing to me that [the Trump administration would] consider timing this short-notice disruption at a time when all American businesses are building up inventories and preparing for the largest sales time of the year," Woldenberg said. "It could not be more disruptive to the American economy if they tried."
