Thread by @Trinhnomics

Don’t forget, this will be on Sunday for consumer goods such as footwear👇🏻👇🏻👇🏻(many items on that already have high anti dumping duties like footwear at ~60), meaning 15% on 144bn (156bn 15 Dec). Oct 1 will be +5% for existing tariffs of 25% on 250bn reut.rs/2LcmBXP

As mentioned, tariffs so far have not translated to higher PCE b/c:
a) Mostly intermediate goods
b) Exporters in China, w/ a cheaper CNY, lower USD prices to offset tariffs but prices still slightly higher
c) Importers absorb some costs & consumers see negligible increases.

Meaning that margins of both exporters & importers squeezed as they don’t want to pass on the whole tariffs to consumers who are already buying less stuff (trend to services vs merchandise goods) PCE likely to rise but not much as mostly services so depends on housing & health 👈🏻

Christmas season coming & retailers are already a lot of pressure from competition of Amazon et al, forcing them to lower costs. Tariffs have a lot of “bark” but bite small. Issue in the US mostly on ineptitude on things like housing & health & consumer goods small share PCE.

If u read the news, few Americans bemoan that their sneakers too expensive or too cheap. They are just shoes & Americans, like many in the developed world, already over consumer these goods so unlikely to care if prices go up 5-10%. But care about gas, healthcare &housing & edu👈🏻

Most of the hit of this tariff will be on the producer side & they have difficult choices: reduce profit margins & pass little costs to consumers, pass the entire tariff costs but consumers buying less as demand elastic, or diversify supply chain away from China. All 3 not easy.

Massive layoffs from this is unlikely as employment strong & retail layoffs are part of the Amazon effect & people sick of buying junk they already have plenty of (Marie Kondo is a retailer nightmare). If rates, oil, unemployment low, households won’t notice as much as producers

Imagine if every human on earth read her book & implement it in real life every time they are about to buy some random trinkets: Does this spark joy & do I have something better at home?

Slowly walk away from the item that u likely already have as we tend to buy the same stuff🤗

Notice how NOT SHOCKED u are despite that this is clearly escalation & unless there are efforts to de-escalate, we are here. My guess is that the 156bn on 15 Dec is either gonna be front-loaded or delayed. China exports likely OK on front-loading in 2019 but impact massive 2020👈🏻