US tariff on China spells bad news for American lovers of lingerie, luggage

A vast amount of items used by American consumers are sourced from Chinese or Hong Kong based companies and factories

Donald Trump’s move to slap tariffs on at least $50 billion in Chinese imports may be bad news if you’re an American who likes wearing Victoria’s Secret bras, Guess jeans or Nike shoes.

 

A vast amount of items used by American consumers -- from Under Armour leggings to Bath & Body Works shower gel and Samsonite luggage -- are sourced from Chinese or Hong Kong based companies and factories, fueling the $450 billion in Chinese goods imported to America annually. Broad-based tariffs will likely translate into higher sticker prices in stores across the US

 

US Trade Representative Robert Lighthizer will levy tariffs on about $50 billion in Chinese imports, the White House announced. After President Donald Trump signed an executive memo on Thursday, the agency has 15 days to propose a list of products that will face higher tariffs. Many U.S. retailers opposed the decision, saying the move would raise prices on consumers.

 

Companies are already planning for it. If tariffs are raised on its products, Samsonite International SA chief executive officer Ramesh Tainwala sees one logical recourse. “We pass it on to the consumer,” said Tainwala, who spoke to reporters in Hong Kong last week. “We have the pricing power. We are the ones who will move first and the industry will follow."

 

Samsonite is in an unusual global position. While the world’s biggest luggage maker is based in Mansfield, Massachusetts, it is listed on the Hong Kong exchange. Samsonite executives say it manufactures two-thirds of its products in China and currently pays a tariff of more than 25 percent on them to the U.S.

 

The impact on other American companies would be widespread, fanning out across the U.S. because of the intricate links with international supply chains. Tariffs hitting one company in China can have a ripple effect across dozens of customers in the U.S. The connections are particularly strong across the apparel and technology industries.

 

Hong Kong-based Li & Fung Ltd. alone collects about 64 of revenue from about 50 consumer-product companies in the U.S., including retailers Walmart Inc., Macy’s Inc. and J.C. Penney Co. For Regina Miracle International Holdings Ltd., a Hong Kong-based manufacturer of intimate wear, American demand for lingerie makes up about 60 percent of revenue. Its customers include lingerie brand Victoria’s Secret.

 

Lenovo Group Ltd., the Beijing-based computer manufacturer, gets almost a third of its $43 billion in annual revenue from North America by selling its products to companies such as HP Inc. and Verizon Communications Inc.

 

Apparel and footwear, telecommunications equipment and household appliances are among the Chinese manufacturing sectors with the biggest exposure to the U.S. market, according to a Moody’s research note released on Thursday.

 

Broader Impact

 

Because of the complexities of international supply chains, the impact from tariffs may be felt beyond Chinese manufacturers and their U.S. customers, Moody’s analysts Marie Diron and Michael Taylor wrote in the note. Products from other parts of Asia may also be vulnerable, as items made in neighboring countries destined for American stores often wind their way through China.

 

Closer to home in the U.S., smaller companies may feel the brunt of restrictive trade actions, according to Gary Huang, the Shanghai-based founder of consultancy 80/20 Sourcing. Multinationals with mature supply chains like Walmart could shift to Vietnam or India to avoid the tariffs, he said. On Amazon, more than half of product listings come from smaller businesses that source from China, which Huang said would be hit hard.

 

“These guys are going to be left holding the new tariff bill and those prices will go straight up,” Huang said. “This year’s Christmas could be a lot more expensive.”