Illustration: Liu Xiangya/GT

Americans will soon be celebrating the Fourth of July, or the Independence Day, with fireworks, but those fireworks may be more costly and harder to come by this year, as a result of US tariffs, US National Public Radio (NPR) reported on Saturday. Although the fireworks industry is not extensive in scale, it exemplifies, to some extent, the wider ramifications of the tariffs on the US economy.

Some Americans might hope that higher tariffs will encourage companies to abandon foreign goods and bring manufacturing back to the US. However, the case of fireworks illustrates why this expectation may be unrealistic. 

As Julie Heckman, the executive director of the American Pyrotechnics Association, told NPR, the stringent safety and environmental regulations in the US cast doubt on the feasibility of US domestic fireworks production.

In other words, if the US is inherently unsuitable for fireworks manufacturing, then raising tariffs is likely to make fireworks more expensive or scarce for American consumers.

Worse still, whether through higher costs or scarcity, there could be a detrimental impact on the fireworks sales network in the US - a network that also supports many American jobs.

Fireworks might just be the tip of the iceberg, highlighting a range of products that, for various reasons, may no longer be feasible to produce in the US, or are only produced in limited quantities. These products heavily rely on imports. Taking China as an example, according to a 2016 report by the Peterson Institute for International Economics (PIIE), there were 83 products where 90 percent or more of US imports came from China. 

According to the PIIE, this list included items such as Christmas lights, some of which are labor-intensive products. Indeed, this aligns with the natural progression of international economics. After decades of global industrial evolution, the US has lost its comparative advantage in certain low-tech, labor-intensive industries, which is a normal phenomenon. 

When considering a range of factors including the structure of the labor force and wage levels, the US is not yet in a position to facilitate a resurgence of manufacturing - particularly within low-tech, labor-intensive sectors - and to foster a holistic development of manufacturing supply chains across all sectors. 

In light of this, one potential outcome of levying tariffs on imported goods could be to render these products more costly or less available to American consumers.

A significant portion of the fireworks found in the American market originates from China. Heckman was quoted as saying that 90 percent of the display fireworks are manufactured in China. If the US is genuinely interested in developing industries similar to fireworks and enriching its manufacturing sector, it might be worthwhile to visit Liuyang, a city located in Central China's Hunan Province, renowned for designing and manufacturing fireworks.

In the city, the production of fireworks has achieved economies of scale. According to the Xinhua News Agency, Liuyang is home to 431 fireworks and firecrackers manufacturing enterprises, with an annual output value exceeding 50 billion yuan ($6.97 billion). Liuyang's exports account for approximately 70 percent of China's total fireworks exports. Behind the thriving fireworks industry in Liuyang lie a sophisticated support system, encompassing research institution backing, an optimized industrial environment, and a diverse marketing network through various expos and trade fairs. 

The cost advantage generated under the influence of the aforementioned factors can fully benefit American consumers through reciprocal trade. For the US, the optimal strategy would be to eliminate the additional tariffs imposed on imported fireworks, unlocking cooperative opportunities between China and the US in this sector. This approach would benefit both American importers and the consumers.

Undoubtedly, US tariff policies have exerted some pressures on China's fireworks industry, especially in terms of the exports to the US. However, as long as the Chinese fireworks industry continues to innovate and maintain its competitiveness in the international market, it can diversify its export markets and enhance its developmental resilience. In many ways, the fireworks industry serves as a case study, shedding light on the broader implications of US tariff policies for both the American economy and its trading partners.