We have reached the end of another week of uncertainty and confusion surrounding the China tariff situation. There was a glimmer of hope midweek after Trump was quoted as saying “tariffs on China will be negotiated much lower.” This pronouncement came the day after meeting representatives from Walmart, Target and Amazon, and there was genuine hope that these retail behemoths had warned the President of impending rising prices, empty shelves and major supply chain disruption – and that the message had got through.
Sadly, the next day, the White House Press Secretary appeared to row back on the President’s comments, stating that there would be “no unilateral reduction in China tariffs.” So, which is it? I heard a rumour that they play music to journalists while they’re waiting for White House press conferences to begin: this week’s playlist consisted of “What’s going on”, Queens of the Stone Age’s “No-one knows”, Janet Kay’s “Silly Games” and finished off with Green Day’s “American Idiot.” Allegedly.
Joking apart, this flip-flopping is leaving a lot of companies in limbo. I have heard of many US suppliers and retailers pausing shipments from China, in the hope that the tariff situation will be resolved soon. But they can only delay for so long: the general consensus suggests there is around a four-week window before this starts to have a huge impact on the festive season – any later than that, production and delivery times will result in late arrival of products on shelves. And can you imagine the scramble for container space if a compromise can be reached in the next month or so – not to mention the price gouging that would inevitably follow.
And what would a “compromise” look like? If the US continues to insist on a 10% tariff baseline for all countries, China will presumably have a higher tariff rate. Between 10-20% would be painful for suppliers, retailers and consumers, but maybe just about workable. Anything above 20% (and there are rumours of the figure settling around 40-45%) would ratchet the pain up to a whole other level for everyone, and in many cases would be as unworkable as 145%.
This situation won’t just affect the US market either: when it comes to toys, the rest of the world often piggybacks on US production runs. If the US doesn’t take the product in the first place, either the price would rise for everyone else, or the product may not even go into production and be held back until 2026.
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