Why the Trade War Isn’t About Tariffs

There’s more to President Donald Trump’s trade war than meets the eye.

The global back and forth — initiated by Trump in March — has seen the U.S. slap tariffs on $250 billion in Chinese imports this year, while Beijing has retaliated with levies on $110 billion of American goods.

While much public discourse has focused heavily on the impact of rising tariffs — i.e., the financial burden it adds to U.S. firms and higher end-costs for consumers — the trade war is hardly about levies, according to experts at the 6th Annual Sourcing Journal Summit in New York on Thursday.

“The trade war is not about tariffs — when you hit people in the pocketbook, you get their attention,” explained Nicole Bivens Collinson, president of international trade and government relations at Sandler, Travis & Rosenberg. “We’re getting China’s attention. I don’t think the U.S. is going back down, and China isn’t going to back down, so we’re stuck in this for I would say 20 years. I don’t see any way out. Even when a new administration comes in, they’re not going to say, ‘We’re OK with China now; let’s just take those tariffs off.”

Still, insiders on the panel — moderated by American Apparel & Footwear Association president and CEO Rick Helfenbein and entitled “How to Avoid Becoming Collateral Damage in the Trade War” — pointed to a lack of clarity about the end goal of the Trump administration’s apparent “attention seeking.”

“I don’t think anybody really knows what the strategy is,” said Robert Sinclair, president of Supply Chain Solutions at Li & Fung Ltd. “It’s a tactic, and it’s certainly disruptive. But what’s the bigger agenda? Right now, these tariffs are transactional in nature, and it’s almost a tit for tat. … Is there something bigger here behind the scenes?”

Similarly, Maristella Iacobello, VP of customs compliance and government relations at PVH Corp., drew a contrast to previous years when she said the government was more transparent about its agenda around trade.

“It just seems to me that in the past, we were able to provide some kind of concrete information to the global supply chain,” Iacobello said. “What are we fighting for? [Trump] says ‘sufficient progress.’ What does that mean? What do they expect China to do? There’s no ‘I need this, this and this.’ There’s no ABC.”

Collinson also cautioned that at some point — due to the U.S.-China trade deficit — China will become unable to fight the U.S. with tariffs and could start to resort to other tactics.

“The other thing I worry about is retaliation by the Chinese — they’re not going to be able to go tit for tat with tariffs much longer,” she said. “They’re masters at non-tariff barriers … They can make your life hell.”

Nevertheless, despite its broad implications, in the near term, the impact of the trade war is largely monetary.

“Our industry accounted for more than 50 percent of the $33 billion [in tariffs] the U.S. collected in 2017. That translates to about $17 billion a year,” said AAFA EVP Steve Lamar. “Of course, extra tariffs have been levied this year — so that number is really going up quickly. Our government collected an extra $4.5 billion about a week ago and $3.7 billion about 20 days ago. That number will increase again as more tariffs are collected each day and then go up dramatically when the tariff rate rises on Tranche 3 from 10 percent to 25 percent come Jan. 1.”

Other speakers at the sixth annual Sourcing Journal Summit included Colin Browne, Under Armour’s chief supply chain officer; Erika Swan, VP of product operations at Reebok; and Will.I.Am, the Black Eyed Peas founder-turned-technology entrepreneur.

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