China-US Trade Tensions: Consumer goods price hikes may be temporary

World
Europe

02:57

Three months since the start of US-China trade friction, the ripple effects on Chinese consumers may not be as bad as previously thought. All along, it's been a concern that consumers will pay for increased duties. But as reporter Xu Xinchen found out, the trade woes may hit American consumers the hardest in the long run.

This pork vendor is asking for an extra two yuan, or 30 cents, per kilogram of pork versus two months ago. The increase can be traced back to higher prices for soybean pulp based pig feed.

PORK VENDOR "With pig feed costing more now, we need to recoup the costs somehow."

China imposed 25% retaliatory tariffs on US soybeans in early July. That pushed up costs for soybean products. Some analysts predict, for each 10 percent increase on soybean prices, products like pork and tofu could see a 1 percent rise. While effects of the trade friction are ripping into farmers markets, it is not the sole reason for price inflation.

PORK VENDOR "The swine flu outbreak earlier also pushed up the price -- but that's cooling down now."

Consumer sentiment is still intact, and many Chinese believe the trade friction has not hit their shopping baskets yet.

"I don't think the trade friction is affecting producers' prices. Not sure if it will affect more expensive goods though."

"I don't believe the trade friction is the main reason for inflated prices on agricultural products. A depreciating Renminbi might affect prices but not so fast."

On the contrary, US consumer confidence has been slipping.

PROFESSOR. JOHN GONGUNIVERSITY OF INTERNATIONAL BUSINESS AND ECONO "Pretty soon, people are going to realize that the people they put in the White House are actually, eventually hurting them in real dollar sense."

According to the University of Michigan's Consumer Sentiment Index, US consumer confidence has been in decline — down 5 points compared to the first quarter of 2018 -- missing forecasts. Professor Gong adds that the US relies much more on Chinese goods than vice-versa, and the US is running out of options to sell to China.

PROFESSOR. JOHN GONG UNIVERSITY OF INTERNATIONAL BUSINESS AND ECONOMICSENG "For example, if people are used to using sunflower oil instead of soybean oil. That's going to have a long term impact on American exports of agricultural products to China. I think Americans are already running out of exports to China."

Nevertheless, a trade war is not winnable. Professor Gong says price hikes for consumer products will eventually come harder -- at least until Chinese companies successfully find alternatives to replacing American imports.