China tariff increases take effect on local businesses

Honolulu businesswoman Hong Pan has had to raise prices by 25% on dozens of products she sells at her Chinatown shop.

The 12-year owner of A1 Trading LLC, who imports nearly all her merchandise from jewelry to trinkets from China, said business is suffering as a result of President Donald Trump’s trade war with America’s largest source of imports.

Trump increased tariffs to 25% from 10% on $200 billion worth of Chinese imports in June and last week said he intended to add another 10% tariff as of Sept. 1 on an additional $300 billion in imports — virtually everything, including smart-phones, laptops, clothes and toys.

A couple of months ago, Pan had to raise the wholesale price of the magnets she sells to $1 from 80 cents with retailers turning around and selling them for $3 instead of $2. The increase was the result of the tariffs.

“Now we’re paying an extra 25% tax on the magnets. In order to sell those magnets, we have to raise the price. The customers are paying the bill,” said Pan’s brother, Thomas, who works at the shop.

In turn, business has dramatically decreased, he said.

“We used to have sales every day; now it’s no sales in three days,” he said. “People used to buy expensive stuff; now they’re not. Now she’s kind of losing money every day. She tries to hold on, tries to survive, but once she’s out of money, then we’re out of business and we have to shut down.”

It’s possible the tariffs could be called off before Sept. 1 if Beijing shows goodwill on buying American agricultural goods and agrees to further negotiations, a White House economic adviser said this week. But there are no guarantees.

“If it (the price of imported goods) goes up for the consumer … it would be a concern because that would not be so much penalizing China as it would be penalizing the consumers in the U.S.,” said Mililani resident Lori Taira, 55, who was shopping in Chinatown on Thursday. “I do shop at Walmart where almost everything does seem to be made in China.”

Tina Yamaki, president of the 200-member Retail Merchants of Hawaii, said the tariffs will affect almost every consumer product, which is especially bad for an island state where most things are imported.

“If they’re not made directly in China, a lot of the components that go into these things are,” she said. “Now you’re going to see the price increase, especially for 2020 models. Everyone across the U.S. is going to be affected — Hawaii a lot more so because we have to ship everything in. It just adds onto the costs. We already have a high cost of living.”

U.S. imports from China, which account for 21.2% of overall imports, totaled $539.5 billion in 2018, up 59.7% from a decade ago, according to the Office of the U.S. Trade Representative.

Nathaniel Hartmann, associate professor of marketing at the University of Hawaii Shidler College of Business, said consumers can expect not only higher prices, but fewer options since retailers are likely to consolidate products in order to get better pricing.

“The trade war puts a gray cloud over the economy in that people are more fearful about what will happen in the future,” he said. “(But) there’s always a lot of sides to a tariff story. There are positives in that it does help our companies long-term protect some of their intellectual capital. It’s really hard because consumers do pay a price for it, but it’s a price that may be worth paying.”

Bloomberg News contributed to this report.