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American Business Scrambled to Beat Big Wave of China Tariffs

Stock Markets Sep 27, 2019 08:36AM ET
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(Bloomberg) -- Another reminder arrived this week of how President Donald Trump’s trade war is driving business decisions.

U.S. imports of consumer and capital goods jumped by the most all year in August, while other major categories eased. You’ll recall that Trump announced 10% tariffs on an additional $300 billion in Chinese items at the start of that month, which likely left companies scrambling to boost shipments of exactly those goods to save some money before getting hit with higher prices starting Sept. 1.

While the goods trade data release didn’t include merchandise shipments or break down regions, some assumptions can be made because this has happened several times before, when Trump announced or threatened levies on China, and his brief flirtation with levies on Mexico in June. That’s been the ongoing game for U.S. firms, and executives have pointed to the trade uncertainty as a risk to business growth (in the case of FedEx (NYSE:FDX) for example) and to the economy.

Washington’s trade war with Beijing has created supply-chain headaches for U.S. firms that rely on Chinese imports, at the same time capital spending slows in response to weaker global growth. As a result, manufacturing has gone from a bright spot to a soft one.

The tariffs are also obscuring the true picture of economic growth: Boosts in exports and inventories tend to provide temporary strength to quarterly gross domestic product, while emptying warehouses weigh on GDP — a phenomenon that in the past year has bounced the data around. The higher prices have also filtered through somewhat into inflation, and the consumer outlook.

Overall, global goods trade was weaker in August. The merchandise trade gap barely budged (it widened, but less than expected), with exports ticking up slightly and imports rising 0.3%. Watch for the full trade balance report Oct. 4, which will provide more detail, including a regional breakdown.

American Business Scrambled to Beat Big Wave of China Tariffs
 

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