Why I Am Shopping for Clothes (I Hate Shopping!)

From Spencer Hill/Goldman Sachs “US Daily: Company Views on the Return of the Trade War” [not online].

…we see multiple reasons to expect higher pass through rates on the upcoming rounds of tariffs on Chinese imports (relative to those of 2018).

First, company commentary indicates that the first 10pp tariff on $200bn of Chinese goods was easier to absorb. As shown in the final five quotations of the previous exhibit, several firms indicate that the step-up from 10% to 25% will have a larger incremental impact on consumer prices (e.g. that the marginal impact will be more than 1.5x as large) and/or company margins. This may reflect the limited number of cost-saving levers in the short-term. Dollar appreciation vs. the yuan last year may have also mitigated the consumer price impact of the 2018 tariff rounds, whereas the currency pair is roughly unchanged this year.

Second, not only are the $200bn and $300bn tranches larger and skewed more towards consumer goods than earlier rounds3, US firms are also more reliant on Chinese producers for each successive tranche (see here and here).4 As internet retailer Wayfair noted last week, “If you want to buy a wood sleigh bed manufactured in China, there’s a wood sleigh but that looks exactly like it manufactured in Vietnam, and the price is not going to change on the one from Vietnam.” As tariffs are applied to increasingly differentiated imports, the scope for diversion falls.

Relatedly, two academic studies analyzing US import, producer, and consumer prices found that even the 2018 tariffs were paid entirely by US businesses and households…

So, for now, Americans are paying the costs of US tariffs on Chinese goods – as highlighted by this graph. For the tariffs in place…

At one point, I thought Mr. Trump would steer away from imposing this last tranch of tariffs on the Chinese, but I was using a rational actor model. Indeed, I think I was misguided more generally thinking tariffs were a tool to leverage the Chinese. I a coming to conclude — like many others, including Jeff Frankel — that tariffs are the objective.

So…I’m going clothes shopping (which as I said, I hate doing). Thanks, Drumpf!

Update, 5/28, 11:35PM Pacific:

More discussion in McGrath’s post on consumer impacts/effects.

“My guess is a 10% to 15% price rise after a month or so, and then staying steady at that point,” Gawande says. “So if you find a dress or a shirt you must buy and the price is decent, do it now.”

Well, I’m set for a couple years now…I hope the tariffs are off by then.




40 thoughts on “Why I Am Shopping for Clothes (I Hate Shopping!)

  1. Zi Zi

    Don’t go crazy and don’t delete my posts Menzie.

    There’re two contradictory forces here:

    – CNY weakened 3% so far
    – USD (using USDJPY as risk indicator, econometrically US CPI reacts to Bitcoin, but guess it’d be “unimaginable” for you guys) weakened 2%

    So they roughly cancel out. There’s still the substitutability of goods, and job market strength to consider.

    Do calculations by yourself. Don’t always quote articles saying “We believe…” “We estimated …” (attn: pgl)

    1. Menzie Chinn Post author

      Zi Zi: Please don’t go paranoid. I have a life beyond approving comments on this blog. I have checked my delete-log. None of your posts have ever been deleted. Please do not imply I have deleted any of your posts.

    2. Menzie Chinn Post author

      Zi Zi: Spent a couple minutes downloading bitcoin price from FRED, ran Granger causality tests for first difference of logged variables (bitcoin, CPI) and failed to reject no-causality null, either direction, 2015M02-2019M04. So…I did my own tests. Please send yours. I would *love* to see your analysis. I will post if you like.

  2. Barkley Rosser

    More precisely I think Trump does not know what to think, with what that is varying from day to day with some claims being that it depends on whom he last spoke with. So at times he seems to be the “rational actor” in this trade war matter, putting tariffs out there to supposedly bludgeon others into giving us “good trade deals.” One case where he may have sort of done this, or thought he did, was the new NAFTA, although as has been widely noted it is only marginally different from the old NAFTA, with most of the minor improvements in it items that were in the TPP he rejected. The others seem to be heightened auto protectionism against Mexico and some deals for the dairy industry with Canada. But then he messed things up by failing to remove the steel and aluminum tariffs he had put on them to get them to the bargaining table until just a week or so ago, with it still not ratified.

    But then we have the Lou Dobbs influence that seems to take this “tariffs are good” and just an end in themselves. Trump seems to go back and for the, and yes, Menzie, I too thought he was going to be the rational Trump and cut the deal with China, but then the Lou Dobbs mercantilist Trump popped up, and here we are.

    1. pgl

      Ala Google, I tried to find some Lou Dobbs commentary on this topic. What I found was an intelligent oped from the Orange County Register. This part of the world is sort of pro-business Republican, which means a lot of residents likely voted for Hillary Clinton as they are too smart to vote for Trump.


      The title gets to the point:

      “Ramped up trade war will mainly hurt U.S. consumers”

      But they let Dobbs have a sentence early on:

      “For instance, Fox News host Lou Dobbs saw it as a rebuke of “globalists and elitists,” who he believes are driving the U.S. into economic decline. But nationalistic tropes ignore reality. Trade isn’t the cause of the despair, but a key reason for our sustained growth and unparalleled wealth. More than 11 million jobs – many in the blue-collar heartland – are dependent on exports. Those jobs are just one example of international trade’s wide-ranging benefits. The growing economy makes it easier to ignore the ill effects of the administration’s policy, but they are inflating prices on many goods and limiting choices for consumers. Putting government, rather than individuals, in charge of economic decisions is never a sound idea. Recent research from economists with the Federal Reserve Bank of New York and elsewhere found that “the full incidence of the tariff falls on domestic consumers, with a reduction in U.S. real income of $1.4 billion per month by the end of 2018.” Other countries retaliate with tariffs of their own, which harms their economies and negates any benefits to U.S. firms.”

      The oped continues and is worth the read. I could have linked to some long winded Dobbs rants but I want to spare everyone from his usual insanity.

      1. dilbert dogbert

        Orange county went blue in the last election. I think there must be something in the water.

    2. Willie

      Trump does not know what to think? He does not think. He reacts. If he was thinking, he would not do some of the things he has done, as demonstrated by analysis here and elsewhere. Bill McBride has not made any predictions, but he did not sound as sanguine about the economy for the last day or two.

  3. Zi Zi

    Menzie you’re right in your test. Now if you filter out those large rise and plummet and do it during “quieter” periods?

    Cue: relate Bitcoin price to DFF (Effective Fed Funds rate)

    … Actually USD, Bitcoin, rates are all somehow inter-linked.

    1. Moses Herzog

      Zi Zi, which for-profit college in China did you attend??

      Next time try Tsinghua or Fudan University, and don’t scout the chicks too much during the regular school term, ok??

      There’s a rumor going ’round that Muddy Waters Capital LLC has gotten a lot of money indirectly from you Zi Zi, by short selling all of the schools you attend, and I really hate it when people talk that way about you Zi Zi.

  4. Not Trampis

    ZiZi I can affirm that comments get stuck in the spam filter but Chinny ( Hey Menzies I have just Aussied you) will change that if asked.

    On pass through of tariff increases ( or falling currency) the experience down under is it depends on the state of the economy. If in recession there is little pass through and thus a reduction in profits and in a boom there is mostly pass through with little reduction in profits. Pretty much practice matching theory.

    Thus you yanks should expect high pass through and thus higher prices

  5. Moses Herzog

    Orange Excrement isn’t just an embarrassment to America. He’s an embarrassment to all of Earth’s humanity. Can you imagine if beings from another galaxy visited this world and saw this jackass running the supposed strongest nation on the planet?? You’d be tempted to cull them just to put them out of the misery of watching his press conferences:

  6. Moses Herzog

    Somewhere Betsy Devos and Dan Patrick are laughing a diabolical laugh together.

    More white trash morons and USA ex-military getting their lives completely ruined with useless “class credits” that don’t transfer anywhere, loans they will never be able to repay, and “degrees” that mean nothing. Oh look!!!! I found recent video footage of Dan “The Shyster” Patrick and Betsy “Bride of Satan” Devos talking about their favorite “college”—Full Sail.

    No worries Dan, you’re only preying on the most vulnerable segment of society–which makes you an “All American guy” in the MAGA era. You keep cashign those check from Full Sail “university” Dan. Your family must be very proud of you.

  7. Mark

    Where is my check? The leadership of my country has determined that a trade war is needed. This leadership is softening the blow to farmers by giving them $18 billion. Farmers are a small percentage of our nation. Many of us buy clothes, appliances, and household goods from China. Should not the government write us a check, too?

    1. Moses Herzog

      @ Mark
      That’s only if you believe in “redistribution of income” and socialism like donald trump does. You give to Brazilian commodities producers and you takeaway from the American farmer and food consumer. Then you put on your orange sunless tanning lotion and puff out your porker belly and say “Boy, I sure showed those damned Chinese, didn’t I!?!?!?!?!” Then all the white trash attending Full Sail “University” cheer you from the idiots portion of the stadium.

    1. Menzie Chinn Post author

      Bruce Hall: Hmm. I remember teaching my students something about what happens to domestic substitutes to imported goods that have tariffs applied. Also, what happens to 3rd country producers of substitutes for imported goods that have tariffs applied to them. Bruce, can you guess what I taught them (out of a textbook — *any* international trade textbook)?

      1. Bruce Hall


        I don’t believe you focused on my point: alternative sources for imported products. The U.S. decades ago abandoned most of its textile manufacturing for overseas sources and, since textiles was not perceived as a strategic asset for the U.S., no one took much notice or complained. That didn’t mean U.S. companies abandoned textiles, they simply shifted the manufacturing locations, primarily to China because of cheap labor.

        Now, when tariffs were applied to all imported steel by George Bush, it certainly had an adverse impact on users of steel in the U.S. (especially the automotive industry) which I remember because I worked at Ford. I also remember how the Taiwanese exported steel auto body parts in the early 80s. The insurance companies loved them as replacement parts, consumers loved them because they were cheap. And then the crap hit the fan when Ford started getting sued because the “inexpensive” auto body parts began to rust out within a year or so and the “crumple zones” failed to crumple in head on crashes causing injuries to the vehicle occupants. Of course, Ford fought those lawsuits and won, but it cost the company millions in addition to the lost sales of genuine replacement parts. Cheap wasn’t so cheap.

        China took the Taiwanese playbook and expanded it into counterfeit products from designer purses to electronics to replacement aviation components. Same problems. Eventually, China revised the playbook to bring in U.S. manufacturers with the lure of a massive new market. The price: give us your proprietary information. Eventually, the Chinese learned what they needed from their U.S. “trading partners” and began to develop competing products with their partner’s research and development (at no cost to the Chinese). So, what was next?

        Yup, “we don’t need or want you anymore”.

        Meanwhile, China’s industries (many state-controlled) continued to make inroads in the U.S. in critical industries, especially electronics and specialty components for automotive and aviation industries, including the U.S. military. Cheap? Yes. Smart. Not so much.

        I have no problem with normal international trade, but trade with China has never been “normal”.

        1. pgl

          “I don’t believe you focused on my point: alternative sources for imported products.”

          Actually he was addressing this issue but maybe using economic terms confused you. Sorry Bruce – I skipped the rest of your comment given its incredibly stupid opening line.

        2. pgl

          “China’s industries (many state-controlled) continued to make inroads in the U.S. in critical industries, especially electronics and specialty components for automotive and aviation industries, including the U.S. military. Cheap? Yes. Smart. Not so much.”

          I cannot let this intellectual pass. You are implying the Chinese are selling substandard products at a lower price. Of course you are also assuming American buyers are too stupid to realize this. But maybe the Chinese products are both high quality and lower priced. Your little anectodal rant about Taiwanese auto parts is not exactly a reliable indication of your bogus claim here.

          1. pgl

            Gee Bruce Hall thinks parts for Boeing planes is the same thing as Menzie buying clothes?


            BTW Bruce – CNN is not my primary source of information and I could care less about two Senators so you can dispense with your pathetic and childish insults. Try reading the actual article – Boeing which is our superstar aircraft manufacturer and exporter apparently has its own little quality control problem. Why would these guys rely on China for parts when there are so many other alternatives. Of course Boeing management screwed up big time with that 737 issue.

            So your issue is not with the Chinese who have yet to develop an aircraft manufacturer but with that the management of Boeing – a U.S. company. Maybe it is time to give more business to Airbus.

        3. pgl

          Did Bruce Hall get the point of his own link? I guess he skipped even the title:

          “U.S. brands losing share of shrinking Chinese auto market”

          China is buying fewer cars but buying more of their cars from the Japanese multinational auto sector. Of course this fact has NOTHING to do with Bruce’s latest rant.

        4. 2slugbaits

          How does Trump’s trade war address any of these problems? And do you think the Chinese and Taiwanese are the only producers guilty of making counterfeit and low quality parts? I’m old enough to remember when the Big Three made some pretty awful cars. They didn’t start producing decent cars until they faced foreign competition. And is China responsible for Boeing’s 737-MAG problems?

          The price: give us your proprietary information

          Did those US companies not know the Mandarin word for “no”?

          1. pgl

            “And do you think the Chinese and Taiwanese are the only producers guilty of making counterfeit and low quality parts?”

            Most companies realize that when sourcing components from 3rd parties, qualifying vendors and quality control are crucial. Maybe Ford put Brucie in charge of these critical tasks which of course led to their financial doom over 10 years ago.

        5. Moses Herzog

          @ Bruce Hall
          Which part of your faulty chromosome 21 is having a hard time getting the words “domestic substitutes”. Is that a real “toughie” for you??

          1. 2slugbaits

            Bruce Hall How does Trump’s tariff war fix the problem of Chinese counterfeit parts?

    2. pgl

      Census provides U.S. imports in total as well as by nation. If one takes all apparel and footwear (end user code 400), we import around $130 billion per year with less than half from China. It has sort of been this way for years. Why do we import from other Asian nations? One explanation is that Chinese wages have risen so the apparel multinationals started sourcing from places like Bangladesh and Vietnam. But this has been known for years.

    1. Moses Herzog

      Depends the items. Cars?? Electronics?? Home repair tools.

      Television sets. As I’ve grown older I don’t even mind shopping for food so much. It turns into a game of looking at prices and brands, quality and which stores have the best prices on a regular basis. Finding substitutes when the price of an item I like gets to high. A lot of men enjoying shopping, depends the items being hunted down. Clothes I pretty much hate shopping for, but even that, if I can get in and out of the store bing bam boom I even get some feeling of satisfaction if it’s an item I like. I was looking for a poncho the other day. I got it for $4 and it was a dark green color, exactly the color I wanted and when I walked into the store I thought “They’ll never have dark green cuz that’s the one color I actually want”. They had it at $4 and when I left the store I almost felt like I’d robbed the bank.

      1. Barkley Rosser

        Speaking of green and TV sets, this reminds me of an old politically incorrect Soviet joke. So in the former USSR Chukchis (inuit) were often portrayed as uninformed people whom one could joke about regarding their provincial lack of information.

        So, the joke goes that after color TVs get introduced in the USSR, the word finally reaches the Chukchis off at the far east end of the country just across from Alaska. One group decides to send one of theirs to Moscow to get one. When he returns, he does not have one. They ask him why not. He replies, “When I got to the store I asked for a green one, but they did not have any.”

    2. dilbert dogbert

      One of my requirements when trying to hook up with another woman, after the death of my wife, was to find one who did not think shopping was a blood sport. First requirement was a woman who was an outdoors person.. I got lucky. Beautiful, smart, could sail a boat, could water ski, could snow ski, owned a horse and could fly an airplane. Yahoo!!!! More luck than I deserve.

  8. Erik Poole

    MC in a moment of uncharacteristic optimism wrote: ” but I was using a rational actor model. ….”

    The tariffs could be Trump’s answer to pockets of structurally unproductive US workers.

    Or, there could be intrinsic value in bullying and intimidating foreigners who look different. I am inclined to go with this second explanation.

    So tragic. Future growth opportunities for US multinationals are greatest in mixed-race, emerging markets. The Trump movement seems to have absolutely no idea how much it is damaging the US brand.

  9. pgl

    China strikes using rare earths
    Commentary: U.S. risks losing rare earth supply in trade war
    BEIJING, May 28 (Xinhua) — Waging a trade war against China, the United States risks losing the supply of materials that are vital to sustaining its technological strength.
    China produces a majority of the world’s rare earths, chemical elements that have magnetic and luminescent properties and are used in a range of consumer products and electronics.
    While rarely heard, the rare earth elements are the materials that help light up your smartphone, make X-rays possible and ensure the safe use of nuclear reactors.
    As the world’s biggest supplier of such materials, China has always been upholding the principles of openness, coordination and sharing in developing its rare earth industry.
    While meeting domestic demands is a priority, China is willing to try its best to satisfy global demand for rare earths as long as they are used for legitimate purposes.
    “We are happy to see that the rare earth resources and related materials can be used in making all kinds of advanced products that help better satisfy the demand for a good life of people from around the world,” said an official with the National Development and Reform Commission.
    However, if anyone wants to use imported rare earths against China, the Chinese people will not agree.
    By making unilateral moves to contain technological development of other countries, the United States seems to have overlooked one fact: the international supply chain is so intertwined that no economy could thrive on its own.
    According to the U.S. Geological Survey, from 2014 to 2017 the United States imported 80 percent of its rare earth compounds and metals from China.
    Along with the technological revolution and industrial evolution, rare earths are expected to be applied in more areas, and their strategic value will become more prominent, said the official.
    China has reiterated its stand in promoting multilateralism and tried to avoid a trade war that hurts public interests.
    But if necessary, China has plenty of cards to play.


    Barkley Rosser has more on this!

  10. Moses Herzog

    Yahoo Finance, joining the liberal conspiracy of making up stories about the suffering of farmers due to donald trump’s tariffs.

    Some folks are slow learners. They were discussing a Nebraska farmer who still pledged loyalty to trump. When his credit line dwindles around 2021 and donald trump is no longer worried about re-election who will that farmer blame then?? That farmer can’t blame mother nature, because according to the Jesus Freaks (i.e. southern evangelicals) natural disasters don’t hurt “good” (white) people, only the “bad” (brown) ones.

  11. Moses Herzog

    @ Menzie
    I would suggest 1 or 2 of them to you, but because of my personal preference for cheap things I was afraid you might take it as a personal affront. 3 jumped out at me “Gentleman Combatant”, “J Crew”, and “Jos. A Bank” are the ones I would probably go for, but I imagine you’d be looking for more upperclass tags.

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