For Deena Ghazarian, President Donald Trump's trade war with China couldn't have come at a worse time. Less than a month after the founder of audio accessories startup Austere kicked off sales this summer, the US imposed tariffs on $125 billion worth of products made in China. Another round of affecting a wider array of consumer tech products, including laptops and cellphones, is due to take effect Dec. 15 unless the US and China strike a trade deal. This new round of tariffs is expected to affect $160 billion in imports from China.
The September tariffs hit Austere's entire catalog of 25 products with an extra 25% to 27% in costs. The impact on Gharzarian's business has been devastating, she said.
"It's taken 10% off my bottom line," she said in an interview. Gharzarian, who is based outside of Portland, Oregon, added she's done everything she can to avoid passing on the cost of the tariffs to customers. She scrambled before the launch of the company's first products to find alternative manufacturing partners outside of China to help avoid the tariffs and worked with retailers to spread the effects of the added cost of her products.
And yet she said the cost of getting her products to market was still at least 20% more than she had hoped, which resulted in higher prices.
"We're still competitive," she said. But all of this maneuvering also delayed the launch of her products by nearly half a year She also said that the company has delayed the introduction of additional products and that the situation has slowed her ability to hire more workers.
"It's definitely taken my eye off of being more innovative," she said. "I've had to spend a lot of time figuring out how to work around what's happening."
Even big tech companies like Apple could be impacted in significant ways if the next set of tariffs hits in mid-December. A research note from Wedbush Securities analyst Daniel Ives last week estimates that an additional 10% tariff on China would mean a 4% hit to Apple's per-share earnings.
So far, consumers have largely been shielded from price increases as suppliers, manufacturers and retailers have tried to spread the cost of the new tariffs throughout the supply chain to soften the impact on consumers. But experts say the next round of tariffs, if they go into effect as planned, could become the breaking point.
"The administration has tried to avoid tariffs on consumer products up to this point," said William Reinsch, a former senior US Commerce Department official and a trade expert at the Center for Strategic and International Studies. "But this last tranche of products hasn't been covered and will hit a lot of consumer end products, which will be felt."
The good news is your Black Friday and other holiday shopping should be safe. Trade experts predict that consumers will likely start seeing more significant price hikes by spring. And if tariffs aren't rolled back within the next few months, those increased prices will be much more visible in the 2020 holiday shopping season than they are in 2019. Next year's holiday shopping season incidentally starts right around the Nov. 3 presidential election.
To help you understand what's happening and what this means for you, CNET has put together this FAQ.
What are the tariffs?
The world's two biggest economies, the US and China, have been entangled in a trade war for more than a year over US allegations that China steals technology, forces businesses to hand over trade secrets and unfairly subsidizes its technology companies in an aggressive drive to overtake US technological dominance.
Trump has used tariffs -- which are taxes that importers in the US must pay to customs when imported goods arrive from China -- as a tool to put pressure on the Chinese government to make changes. But the two sides have been upping the ante on each other over several months. The result has been an all-out trade war that is now affecting tech-sector products aimed at consumers.
A 15% tariff on about Bluetooth headphones, multifunction printers and many other products like footwear and bed linens.. It included flat-panel television sets, flash memory devices, smart speakers,
But the administration had largely avoided hitting consumer items in its earlier rounds of tariff hikes. And specifically, Trump wanted to avoid affecting products like Apple's iPhone before this year's holiday shopping season, which unofficially kicks off with Black Friday this week.
So he delayed the imposition of 15% tariffs on another set of products generally thought of as the heart of the consumer technology sector, including $43 billion worth of cellphones imported from China in 2018, $37 billion worth of laptop and tablet computers and $12 billion worth of toys. In aggregate, this list affects roughly $160 billion worth of 2018 imports from China, based on US Census Bureau data.
What's the effect of tariffs on the tech industry?
Trump has insisted that China pays the cost of tariffs. Economists say the actual costs fall on US businesses and then on consumers. Trump indirectly acknowledged the tariffs' impact on American companies and consumers when he delayed the tariffs on products he knew would be affected by holiday sales. Eventually, though, China could be affected if its exporters decide to slash prices to stay competitive.
The Consumer Technology Association, which has been tracking the cost of the trade war, said the first round of tariffs in September on goods such as TVs, digital cameras, Bluetooth earbuds, smartwatches and wearable fitness trackers surpassed $2 billion. The industry association calculates the cost of the trade war thus far at about $15.5 billion, including nearly $1.5 billion in taxes for .
What's been the effect so far for consumers?
Prices on some products have gone up, experts say. But in most scenarios, suppliers, manufacturers and retailers have all tried to mitigate the impact on consumers by spreading out the cost of the increased tax. For instance, retailers like Best Buy and Walmart, which sell a diverse set of products, are able to adjust prices on other products to make up for the cost.
How will next round of tariffs on Dec. 15 affect me?
Even if a trade deal isn't reached by Dec. 15 and the higher tariffs take effect, consumers aren't likely to see price hikes before Christmas since the inventory being sold in the US has already been imported for sale.
But Reinsch said there could be instances in which retailers try to take advantage of the news around the tariff to hike up prices anyway.
Consumers will likely see the effects of the tariffs after the holiday shopping season. Once retailers run out of holiday inventory, it will be harder for them to absorb the costs when they restock in 2020, Reinsch added. There will eventually be a breaking point and prices on some products will go up. When that happens, it could be very noticeable to consumers on high-ticket items like phones or laptops.
"If there's a 25% price increase on an expensive product like an iPhone, people are going to notice," said Reinsch.
Will I pay more for an iPhone or MacBook in 2020?
Not necessarily. Trump said last week afterthat he was considering exempting Apple from tariffs on imports from China.
"The problem we have is you have Samsung. It's a great company but it's a competitor of Apple, and it's not fair if, because we have a trade deal with Korea -- we made a great trade deal with South Korea -- but we have to treat Apple on a somewhat similar basis as we treat Samsung," Trump told reporters, according to a report from Reuters.
Apple has already been hit with tariffs on some products, including its Apple Watch, AirPods, HomePod and certain Beats headphone models, according to Bloomberg. But the company has asked for exemptions on those products too. The iPhone and its MacBook laptops could be affected in the next round.
Is there hope the next tariffs won't go into effect?
In October, Trump announced that the US and China had struck a "phase one deal" that could eliminate the December tariffs. But details of that agreement haven't been formalized. Talks between US and Chinese officials have been ongoing. Within the past few weeks, Trump has threatened to increase tariffs in December if the US demands aren't met. Trump has said repeatedly that the US has the upper hand in the negotiations, but China has also expressed that it feels like it's in a stronger position in talks.
Reinsch believes this dichotomy makes the outcome of the trade talks unpredictable and high stakes.
"We're in a dangerous situation," he said, "because both sides feel they have the upper hand."
Negotiations are likely to continue right up to the Dec. 15 deadline.
The story published at 5 a.m. PT.
Updated, 7 a.m. PT.