“If it doesn’t end quickly, this will result in consumer prices going up aka inflation.”
Well the tariffs just went into effect, so the theory will now be tested.
Going from 10% to 25%, is 15% more than before. 15% of $200 billion is $30 billion.
A $30 billion increase in a $20 trillion economy, has limited inflationary impact - but it will be less than $30 billion, because competition exists, however imperfect, and China will absorb some of the cost to compete as well. Certain prices will go up, until competitive replacements are available.
How long will it take for substitutions to occur? That is a key factor (some quickly, some slowly, all eventually). Chinese production is not divinely ordained, or permanently enshrined in laws of physics - it is just a temporary condition, whose causes are fundamentally changing.
“what about the small and mid-size companies that rely on China to supply them their goods? Do you think THEY have the resources to establish presence outside of China?”
Clearly if they got in to China, there must be a way out. Do you think that they will curl into balls and die, rather than seek out their best option and shift to that? When things must change, they will.
“Well the tariffs just went into effect, so the theory will now be tested.”
The tariffs will be on containers that left China on the 10th, so 20 days on the water and then time to deliver goods inland. I say give this about 90 days and you will see new prices on the shelves.
If you are calculating your consumer price based on landed cost (like all importers) then your cost just went up 25% and you’ll reprice your product based on the new cost. That’s right, companies will be making profit dollars on top of the tariffs. I don’t know why you think this has limited inflationary impact, it isn’t a pass-through.
As far as the small to mid-size companies getting into China, it was easy for them. Easy to source, easy to buy. Certainly, they will begin to try sourcing products outside of China, but it will take some time, and all the while the consumers will be paying for these tariffs at the cashier. This impacts the wallet of the voters, and Trump is putting 2020 at risk by upsetting farmers and consumers as they see only negative impacts to their buying and selling.
Better strategy would have been to offer substantial tax breaks for companies that either buy domestically in the USA or from approved fair trading partners. I would much rather see American companies given incentives to resource that don’t harm the buyer, or impact the economy in the way these tariffs will.