Source : THE AGE NEWS
Cyclone (Donald) Trump continued to buffet Wall Street markets this week, but it is US main street that will begin to feel the blowtorch of higher prices in a few days when an array of cheap online consumer goods from China-based Temu and Shein lose their value sheen.
Like Australians, US bargain hunters have enjoyed these ultra-low-priced products from fashion to nail fillers and furniture – products whose popularity has been fuelled by a combination of social media influencers and value for money.
Discounter marketplace Temu has made a big dent in online sales.
But Trump’s decision to hit them with the taxes of up to 145 per cent on Chinese goods combined with the cancellation of the “de minimis” exemption, under which shipments worth less than $US800 ($1243) could be imported duty-free, is coming into effect this week.
(Those rhinestone press nail kits may not look so pretty!)
How this plays out in Australia remains to be seen. But there is a school of thought among economists that this wall of consumer goods once sold from China to the US could be dumped on other markets such as Australia, and that this could be disinflationary for the countries where these goods land.
“We anticipate disinflation in discretionary consumer goods from a glut of Chinese products,” says Morningstar director of equity research Johannes Faul.
He says that while this is good news for consumers, cyclical retailers could be confronted with less revenue growth.
In the US, this will represent the first real impact on American consumers of the effect of Trump’s trade war. It is where the rubber will hit the road – his blue-collar supporters will see their power tools, or their workwear, increase in price. It will be a taste of the price rises that the American consumer will feel over time as the price of materials, components and finished goods coming out of China, will be added to shelf prices.
Even those MAGA hats (not the official ones) are sold on Temu for about $7 – mass-produced out of China.
The US declaration of a tariff war on the rest of the world is still likely to catch most other countries in its net, but the size of the damage won’t be known for months.
A worker loads parcels outside a sorting centre in Shanghai, China. Credit: Bloomberg
But the battle is laser focused on China and the technology cold (chip) war between the two world giants.
On Wall Street, investors have been newly spooked by another Trump work-in-progress – his attempt to sack the head of the US Federal Reserve, Jerome Powell.
Firing Powell would be unprecedented and has fuelled concerns that Trump is increasingly becoming a law unto himself.
No president has ever removed a Fed chair. The Fed has historically been a non-political part of the government, and the prospect of Trump’s action has sparked concern that inflation would surge as he forced the central bank to ease up on its role of controlling price growth, inflation, in favour of economic growth.
MAGA caps can be found on Temu for about $7.Credit: Bloomberg
It follows a speech from Powell last week in which it felt like he almost relished the chaos unleashed by Trump. He was decidedly clear that the central bank he chairs was not about to lower rates to pander to Trump and his self-imposed threat of inflation.
While Trump has seen sufficient evidence to understand that even jawboning about removing Powell and undermining the Fed’s independence is throwing a grenade into equity and bond markets, he appears to be unfazed by this outcome.
His upending of trade agreements has already been responsible for a sell-off in equities around the world including in Australia, but has not dented his enthusiasm for pushing ahead with his policy agenda.
Amid the chaos on the US markets on Monday, Trump opened up a new battle – a war on water heads – issuing an executive order to “make America’s showers great again”.
(Websites are not yet marketing “MASGA” hats but give it time.)
It was perhaps one of the most surreal moments in Trump’s second term that he chose this moment to fight against low-flow shower heads, which previous US governments had regulated to save water and power.
Reports say that LED lights (which Trump also dislikes) and low-flow taps and shower heads have reduced water and energy bills.
Trump reportedly told a rally in 2017 he wasn’t a “vain person”, but that he looks “better under an incandescent light than these crazy (LED) lights that are beaming down on”.
As markets continue to gyrate and the world trade order is challenged, at least Americans can take comfort that shower roses will regain pressure and the bathroom lights won’t tint one’s skin an unusual shade of yellow.
