Tariff Whiplash: The US Truce With China Offers Hollow Relief

Supply disruptions and recession fears will keep US demand low

- ANDREA FELSTED

The interim trade deal between the US and China struck in Switzerland marks a dramatic volte-face after weeks of simmering tensions. But don't expect an equally breathtaking about-turn from US consumers. Amid the uncertainty about economic growth, job cuts and inflation, it will take time for shoppers to regain their confidence. Even if they do, there are some reasons why the pain for retailers and consumer goods groups may be prolonged.

Under the latest US-China agreement, the combined 145% US levies on most Chinese imports were set to decline to 30% by 14 May. The new rate is still unhelpful, but it's a lot better than the threatened levy, which would have made some products, including toys and Christmas decorations, simply uneconomic to sell in America.

Retailers, suppliers and consumers will still have to share some pain. For Americans, that means some level of price inflation on the mostly non-food items that come from China. Take clothing, for example. At 145%, retail prices for the mid-market knitwear and coats that are typically manufactured in China may have had to increase by 20% to 30%. Price hikes should now be less.