Although the US has reduced tariff rates on Chinese goods, American consumers may still face price hikes and potential shortages. The temporary reduction in tariffs, from 145% to 30%, has led businesses to rush orders and secure products made in China before rates potentially rise again. This urgency has caused companies to pay premiums, which diminishes the savings from the lower tariffs.
Businesses importing from China are experiencing increased production costs due to higher wages and raw material prices. Factories are also raising minimum order sizes, forcing companies to stockpile more inventory than desired. These factors contribute to a 15% to 25% increase in manufacturing costs before accounting for transportation and remaining tariffs.
Despite the reduced tariffs, these additional costs are likely to be passed on to consumers, though not necessarily in direct proportion. Companies may absorb some expenses to maintain customer loyalty. However, consumers may notice less frequent sales, smaller discounts, or even out-of-stock items due to supply chain challenges.
The uncertainty surrounding the 90-day tariff reduction agreement between the US and China adds further risk. Even if tariffs are adjusted, prices may remain high if businesses discover customers are willing to pay more.
— new from CNN