The cost of home renovations could rise by thousands of dollars thanks to the increase in U.S. tariffs on Chinese goods. WSJ's Jason Bellini takes a look at how consumers will be affected. Photo: Angus Mordant/Bloomberg
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(gentle music) - Lighting, 15% increases. Flooring, 10 to 25% if the tariffs go forward. This glass door is going up 10%. - [Jason] George Abi Habib's remodeling business in San Diego is bracing for the new abnormal. 25% tariffs being composed by the US on 200 billion dollars in Chinese goods, up from 10% last year. Many materials used in home building and remodeling are included. - We build a lot of things like granite. Those are gonna be sourced from China. - [Jason] Small business owners like Abi Habib are worried that potential clients, due to the tariffs on Chinese goods will balk at soon-to-come higher price quotes. - It takes a long time for customers to adjust to the new reality of what things cost. And in the meantime, we have very large overhead and about 50 staff that we need to ensure have continual work. - [Jason] His concerns are two-fold, that many homeowners will put off major improvements, like getting a new kitchen, and that, to attract potential clients, he'll need to reduce his profit margin. - You're in a position where you could be losing 20 or 30% of your net profits at the end of the year. - You're eating some of the cost, in other words. - Definitely, if we can't pass on all of it to the customer, we end up eating it ourselves. The alternatives for these are much, much more expensive when they're made in the States. - [Jason] Abi Habib says his clients prefer higher-end products, manufactured in America. - Supplier says. - [Jason] But even from these suppliers, he's receiving ominous emails. - They thank us for our business, and they say that our industry is under unprecedented pressure due to tariffs, and we've waited as long as we can for possible price increases due to these tariffs. So this is an American cabinet line, but this built on engineered wood, part of the Chinese supply chain. - [Jason] To give us a better idea of what the new China tariffs will mean for customers, Abi Habib takes us to a work site. - This is the 75000 dollar kitchen. So yeah, as you can see, this was a complete gut job. - [Jason] Abi Habib says because of the new increased tariffs, he'll need to charge for a renovation like this one, 6000 dollars more than he did a year ago. - 6000 dollars on a 75000 dollar kitchen is a very big increase. - Is it a deal-breaker? - It is definitely a deal-breaker. - One of the impacts of the tariff is not simply the price increase, but also the delay in investment, and the delay in investment will come from consumers, for example, delaying a home remodel. - [Jason] Renee Bowen, a professor of international trade policy at the University of California San Diego, says the tariffs could be damaging to the US economy. - It's a big deal, it's going to affect US consumers a lot. - Now you've been studying tariffs and trade for decades now, right? - Correct. - Have you seen anything quite like this? - Never seen anything like this. I've been having to rewrite my classes essentially. The United States would like to think that China will be more hurt by the US tariffs than the US will be hurt by the Chinese tariffs, but that's to be determined. - I think it's gonna turn out extremely well. We're in a very strong position. - [Jason] The Trump administration is also taking steps to impose fresh 25% tariffs on nearly 300 billion dollars in Chinese goods that aren't currently taxed. - I think this is a risk we should and can take without damaging our economy in any appreciable way. - [Jason] The Trump administration hopes that ultimately a deal with China will be reached that benefits US producers. - There may be more made in America as a result of the tariffs. Consumers now are forced to purchase from domestic producers, who have higher prices naturally, while producers are enjoying this welfare gain, consumers are losing. - [Jason] This tile and flooring store in San Diego primarily serves customers who've got tighter budgets. - This is our wood-looking luxury vinyl plank, which is one of the most popular items nowadays. - [Jason] And where's it from? - This product is actually a Chinese product. Even with the tariff increases on these products and anything out of China, they're still gonna be less expensive than an American-made product. - Even with the 25% tariffs? - That's correct. - The trade war is bad news for everyone, but particularly the middle class and lower-income Americans. - Lower-income Americans. - Lower-income Americans benefit from the very cheap products that are coming from China. - So let's head down over to the warehouse. - [Jason] Veronica Terriquez says about 90% of the products her company sells come from China. - So if you take a look here, you will see made in China here, made in China. - [Jason] Terriquez says she's nervous. - I, as a manager, have to worry about, for instance, my staff's jobs, our company. - [Jason] When the first round of tariffs on Chinese goods hit last fall, she says sales dropped off pretty much immediately. - We're talking about 33%. - So a third less sales. - Exactly right. - Well, and you're confident that it's because of the tariffs. - Uh, yes, the store was just very, very busy, and it came to a screeching halt. - As soon as the tariffs hit. - As soon as the tariffs hit. - [Jason] And the new increase round is expected to hit soon. - Goods that are already in transit will not be subject to the tariffs. - [Jason] But goods being loaded on ships in China now will have to pay the tariff when they arrive. - So, we will see a small delay in the impact of these tariffs, about two weeks. - But the tariffs are literally on their way. - Correct, the tariffs are literally on their way. 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