00:00 Brian Sozzi
President Trump saying he will impose a 50% tariff on China. He said that earlier today in the White House. It’s the latest move in his ongoing trade war with the country, and it has been wreaking havoc on the consumer electronics industry. For more, we’re bringing Gary Shapiro, CEO of the Consumer Technology Association. Just to be clear, there already is supposed to be a 54% tariff that will be levied on Chinese goods as of Wednesday. This would then be an additional tariff on top of that, if China continues to retaliate with a 34% tariff against US goods. Um, so given all of that, um, your members, what are they going to see in terms of increases in costs here?
01:19 Gary Shapiro
Well, I’d like to start with the good news.
01:23 Brian Sozzi
There’s good news?
01:24 Gary Shapiro
I’m that type of person. And the good news is that for the next few weeks, you’re going to see a lot of sales of people that are going out and buying a lot of stuff. We’re already hearing that from everybody. Um, obviously, it’s a huge, huge cost increase. A tariff is a tax, and it’s a tax that’s borne by consumers and the producers. Um, and they, you know, they’ll figure out their own pricing on it, but you can’t get a near doubling of your costs and then just say, oh, everything’s fine and dandy, and consumers are going to have a great time. The thing is the the companies I’ve spoken to basically say assuming the economy stays steady, which is a big assumption at this point, which may not be true, uh, they’ll probably still get the same amount of revenue, but a lot of it will be going obviously their cost structure will go up. There’ll be there’ll be, um, fewer people that’ll be able to buy at the low end of the market, people who are entry level consumers, people who have less money. They’ll be just locked out of the market, and they won’t buy. Uh, and then that’ll affect, of course, and is already probably affecting, uh, employment levels, hourly workers, uh, full-time employees. They just can’t sustain retailers can’t sustain keeping them. And I think you’re going to start once we get past the sugar high of the next few weeks when the inventories are low to nothing, uh, or if they cost a lot, you’ll see, uh, some dramatic changes, I believe in employment, um, throughout not only our industry and retail, but every industry, whether it’s apparel or footwear or so many others that rely on imports. I mean, the Americans have the best economy in the world, or we did until recently. Um, and that’s been sustained by the fact that we’ve done really well, so we’ve been able to buy a lot of stuff inexpensively abroad, created in factories that we’ll never have here. Um, we’ve been just that’s not what we’re good at. And it’s it’ll take a long time to even build the factories we should have here, like shipbuilding shipbuilding and shipbuilding, ships and ships. Um, and so it’s a very difficult situation now, not just for our industry, but for multiple industries, and frankly, for the American economy. And that’s reflected in the stock market.
06:19 Brian Sozzi
Right. So, Gary, let me ask you a question. What do you think, um, that China is going to come to the table?
06:49 Gary Shapiro
Uh, I have no idea. I mean, I’ve haven’t been in China in a long time, but I know they’re very proud people, and we can’t, you know, some of the views I’ve heard by people expressing that they’re just copycats, and they don’t innovate and things like that. That’s no longer true. Anyone who’s been to China recently can see that they are they have, you know, they’re investing in so many different ways from their factories to the research and development centers. They they’re starting to become innovators. They’re they’re actually very strategic. They have millions of stem graduates and engineers graduating every year, while we have more than 100,000s. Um, they have people who know how to build factories, and we have very limited knowledge in that area. So, I think some of the companies, like what we’ve heard from like Apple, which will definitely invest in the US, but is also looking to India, some other companies, they’re going to do what’s right for their company globally. Um, a lot of these are American companies. We’re so fortunate we have so many of them here, but I, you know, I’m concerned that this is, uh, these tariffs are taxes that will be inflationary, they’ll cost consumers, they’ll put us back and at the same time when we’re cutting off relationships with around the world.
09:13 Brian Sozzi
Right.
09:14 Gary Shapiro
It’s a very dangerous path we’re on.
09:17 Brian Sozzi
So, Gary, um, there was a report today in the Wall Street Journal that Apple was going to be trying to move some of its production of the iPhone to India from China, um, and therefore not eliminate the tariffs because there are tariffs that are going to be imposed on India, but decrease the tariffs. Do you are you hearing from your members that that is what they are trying to do, or is that a luxury that only the likes of a company with the resources of an Apple is going to be able to to do?
10:02 Gary Shapiro
You know, it’s interesting is our our members, we cut this deal with China in the late 1990s that we would be good friends with them, and we should manufacture there. That’s what our government told us. So a lot of our companies went there. And then President Trump came and said, we really shouldn’t be doing business with China. We should be going to other countries. So a lot of them went invested heavily in Vietnam, and Indonesia, and the Philippines, and Mexico. And now we’re being told just a few years later, oh, we didn’t really mean that. We want you to invest everything in the United States. Well, you can’t invest in the US for multiple reasons, um, one of which is such an unpredictable political environment where things change every four years almost, and there’s no consistent strategy or policy. But we have succeeded in focusing on innovation. So companies will do what’s right for their companies and their shareholders and their consumers. And right now, the US is proving to be a very, very untrustworthy ally. It’s extremely dangerous for the world economy. The dollar is already weakening in just less than one week significantly, and we’re telling our allies that we’re no longer their friends. Uh, this is the worst economic situation I’ve ever seen in my lifetime. It’s just not about any one industry. It’s about our position in the world with going to a weak dollar. Uh, soon we’ll hear perhaps that the countries are going to start stop holding our debt. That means our taxpayers and our citizens are going to only be paying off interest on a debt. As long as inflation is high, which tariffs will definitely do, um, then we have high inflation, high interest rates, and our economy and our recession is likely.
12:39 Brian Sozzi
Right. Gary, thank you for your time. Appreciate it.
12:43 Gary Shapiro
Thank you.