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Backfire Economics: Trump’s trade war hits Walmart and its suppliers and customers
View related content: Carpe Diem
More evidence of Trump’s trade war backfiring on the US economy, inflicting significant collateral damage and damaging friendly fire on American retailers, suppliers and consumers, from CNN Money (“Walmart is where the trade war comes home“):
The latest round of tariffs brings the US trade war with China directly to Walmart, the country’s largest retailer, and hits the everyday products it sells. In a letter to US Trade Representative Robert Lighthizer, the company said expanded tariffs on Chinese imports would hurt its customers, its suppliers and the US economy.
Supply chain havoc
Walmart’s American suppliers rely on parts from China to assemble and finish production in the United States. For example, Lasko fans, which are assembed in the United States and sold at stores, rely on motors from China. The same with bikes: Each mass market bicycle requires 40 individual parts to make, all of which are imported. “Tariffs on these parts would make U.S. manufacturing uncompetitive and drive up the price of bicycles for children and families,” Walmart told Lighthizer. Although the company has been working to buy more bikes from American manufacturers, not enough are made in the United States to meet demand. Even with 25% tariffs, buying bikes with Chinese parts will still be cheaper than suppliers shifting production entirely, Walmart said.
The Trump administration is using tariffs to push companies to manufacture more goods in the United States. But the National Retail Federation says the administration’s thinking is flawed and carefully planned supply chain plans can’t be redrawn overnight. Retailers order their products six months to a year in advance, and they are left scrambling to find new options for 2019. “The [administration] continues to overestimate the ability of US companies to shift supply chains out of China,” the trade group said in its own letter to Lighthizer. “Global supply chains are extremely complex. It can take years to find the right partners who can meet the proper criteria and produce products at the scale and cost that is needed.”