In an effort to pressure Beijing into striking a trade deal, President Donald Trump has announced that he would increase tariffs on $200 billion of Chinese imports from 10% to 25%, starting this Friday. Additionally, Trump mentioned that another $325 billion of Chinese imports will be taxed at 25% in the near future.

If the tariffs indeed escalate at such short notice, the ramifications would be potentially devastating for the promotional products industry, which imports the vast majority of items sold stateside from China. “While a number of suppliers were able to absorb the initial tariff increase, I highly doubt any of them will be able to absorb these costs without passing much of it on to the distributor,” Larry Cohen, president of Top 40 distributor Axis Promotions (asi/128263), told Counselor.

For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions Dollars....

— Donald J. Trump (@realDonaldTrump) May 5, 2019

....of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!

— Donald J. Trump (@realDonaldTrump) May 5, 2019

Trump’s latest threat comes right as Chinese officials were scheduled to travel to the United States this week for what was shaping up to be the final round of negotiations. Now China is considering delaying the trip, Bloomberg reported. The U.S. had been expecting to announce a new trade deal on May 10 that would be finalized and later signed by Trump and Chinese President Xi Jinping at an official summit.

“The latest developments are very worrisome,” says Memo Kahan, owner of Top 40 distributor PromoShop (asi/300446). “Everyone would lose and such uncertainty would cause disruption and volatility. Our hope is that this posturing is just a negotiation tactic and not the solution to the trade imbalance.”

Several industry leaders echo Kahan’s sentiments. “It’s likely a negotiating tactic, but if the Chinese respond by cancelling the meetings this week and the increased tariffs go into effect Friday, it will be a huge blow to the U.S. economy,” says Eddie Blau, CEO of Top 40 supplier Innovation Line (asi/62660). “It’s obviously a severe setback for the promotional products industry, creating an intense amount of chaos and uncertainty.”

The uncertainty includes questions over whether or not any tariffs will remain in place after a deal is struck – and, if so, for how long. Naturally, suppliers and distributors that source/buy most of their products from China want to see the tariffs abolished. Even though the tariffs are on Chinese products, it’s the importing American companies – and, often, ultimately consumers and B2B end-buyers – that pay the price to cover at least some of the levy burden.

Trump again falsely claims that China pays the cost of his tariffs. In fact, a March study found: “Tariffs were almost completely passed through into U.S. domestic prices, so that the entire incidence of the tariffs fell on domestic consumers” #TradeWar https://t.co/Ky1AoZLk14

— Chris Lu (@ChrisLu44) May 6, 2019

“I do believe the president is bluffing,” says Bob Herzog, CEO of Top 40 distributor Corporate Imaging Concepts (asi/168962). “If you watch his actions carefully versus his words, you see he bluffs frequently to get things moving when they seem stuck.”

However, Herzog stresses how detrimental another round of tariffs would be for the economy as well as the industry. “Both suppliers and distributors have sucked up most of the added expenses via previous tariffs,” he says. “That will not be the case moving forward if the president implements the additional tariffs he is suggesting. If we have to increase pricing to the end consumer, we will start to push them into other avenues of spending for their marketing dollar.”

The Dow plunged 450 points on Monday morning after President Donald Trump surprised investors by threatening to impose higher tariffs on China in a late Sunday tweet. Follow live updates on @CNNBusiness https://t.co/M1UDVTJ069 pic.twitter.com/z2k3ot6bWY

— CNN (@CNN) May 6, 2019

Another round of tariffs would affect certain types of apparel, print packaging, fabric bags, electronics and other finished consumer goods. “No corner of the promotional products industry would escape the impact,” says Joshua White, general counsel and senior vice president of strategic partnerships at Top 40 distributor BAMKO (asi/131431). “It’s a big enough change that I would expect it to directly impact purchasing decisions, product choices and sourcing strategy.”

US tariffs, already higher than most advanced economies, would rise higher than many emerging market countries if the new tariffs are put in place, making the US one of the leading protectionist countries in the work (chart from Torsten Slok, deutsche bank) pic.twitter.com/xLVhYSN6be

— Steve Liesman (@steveliesman) May 6, 2019

In all, the Trump administration has imposed tariffs on $250 billion in Chinese goods. China has responded with counter tariffs on at least $60 billion in U.S. imports. Trump initially aimed to escalate the 10% levy on $200 billion in China-made products to 25% on January 1, but he said late last year that progress in trade talks made it reasonable to extend the rate acceleration date to March. In February, Trump extended that deadline.