U.S. consumers are likely going to get caught in the crosshairs of the ongoing trade war with China, as President Donald Trump’s latest tariff threat would cover more consumer goods imported from the country than previous rounds of tariffs.
“The new tariffs are different in that they will be covering a lot more consumer goods that we import from China,” Christopher Smart, chief global strategist & head of the Barings Investment Institute, told Yahoo Finance’s YFI AM on Monday.
However, he added, “If there were ever a time to raise costs on U.S. consumers — when unemployment is so low, when wages are growing — this is probably the time to do it.”
Last week, Trump announced on Twitter that he would be enacting a 10% tariff on $300 billion worth of Chinese goods beginning September 1, after representatives from both sides met for in-person trade talks for the first time in more than two months. This latest round of tariffs includes more goods that consumers buy directly, including back-to-school supplies like backpacks and Apple (AAPL) iPhones.
The new duties would not include the $250 billion of items that have already been tariffed at 25%.
Smart said that while consumer sentiment is strong right now, the weakness in other sectors, including industrials and manufacturing, still brings into question how the U.S. would react to these additional retaliatory tariffs.
“If the consumer also takes a hit on that, I think people be looking very closely as to whether that increases the chances of a recession,” Smart said.
With the standoff likely to last into the 2020 election, Smart said he sees the trade war “getting worse before it gets better,” citing the inability of the U.S. and China to “walk back from the precipice” of the negotiations. Still, he says he doesn’t see trade tensions alone tipping either economy into a recession.
Katie is an associate editor at Yahoo Finance. Follow her on Twitter.