"Though a strong consumer base adds vibrancy to the US economy, the ongoing trade war with China makes its future uncertain as businesses in the country struggle to make crucial investment and hiring decisions. The US recently threatened to retaliate against the higher tariffs levied by China. However, it is the one most affected by these tariffs."

Though a strong consumer base adds vibrancy to the US economy, the ongoing trade war with China makes its future uncertain as businesses in the country struggle to make crucial investment and hiring decisions.

The US recently threatened to retaliate against the higher tariffs levied by China. However, it is the one most affected by these tariffs. As ‘Tariffs Hurt the Heartland’, a campaign group with more than 150 trade groups that oppose tariffs reveals, Since the beginning of the trade war, US consumers and businesses have paid an extra $42 billion due to increased tariffs. Many companies are paying millions of dollars in tariffs since September to keep consumers from bearing the cost. To avoid such losses in future, companies have diverted expansion plans from the US to Europe.

Investments on the decline

Investments in the US declined for the second straight quarter in July through September as the trade war eroded confidence. Manufacturing also contracted for fourth consecutive month in November as orders declined. Mount Vernon Mills, a South Carolina-based manufacturer of apparel fabrics, which had planned to buy new automation equipment deferred its investment plan due to the uncertainty about congressional passage of a new US-Mexico-Canada trade deal. The private company, founded in 1847, produces 75 million yards of denim and other fabrics each year, much of it in the rural towns of Trion and Alto, Georgia. Most of its apparels are sewn in Mexico are shipped back to the US for sale.

One of the company’s biggest customers the North Carolina-based Kontoor Brands, believes the price of Wrangler and Lee jeans that it produces in Mexico could rise by $10 to $15 if Trump cancels the current North American Free Trade Agreement and the US Congress fails to pass the replacement accord. This would compel the company to shift its production from Latin America to Asia and elsewhere, a move that would pose huge challenges for his firm. Therefore, it is important for the US Congress to adopt the USMCA agreement as it will encourage these companies to continue investing in the US.

US companies defer expansion plans to cut losses

US-based companies are putting off expansion plans. For example, Italian cheesemaker Auricchio SpA based in West Caldwell, New Jersey has deferred its plans to buy two cheese-cutting and wrapping machines as the company is not sure how long tariffs on Italian cheese will last and whether they could go higher. Another company that has deferred its expansion plans is Dan Digre, a Minnesota-based audio equipment maker has paid hundreds of thousands of dollars in tariffs on Chinese parts since September 2018, instead of using the money to launch a new line of higher-end speakers that would have boosted its sales besides generating 20 more jobs at its plant.