Trump’s trade war with China is about to start hitting your wallet


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President Donald Trump’s latest threat in the US-China trade war could harm US consumers.
The proposed list of goods that could be subject to a 10% tariff includes many consumer products.
This would cause an immediate price increase on those goods for US consumers.

President Donald Trump’s escalating trade war with China could very quickly get very real for millions of Americans.

Trump’s tariffs on Chinese goods have so far mostly spared US consumers, focusing instead on industrial materials such as bulldozers or large factory equipment. While those costs would likely indirectly hit average Americans, Trump’s latest proposal — which would place tariffs on $200 billion worth of Chinese exports to the US — will hit much closer to home.

The list, released Tuesday, could add an extra 10% duty on many consumer goods including TVs, leather handbags, buttons, and basic groceries.

The US Trade Representative’s office, which put out the list and would be responsible for implementing and executing the tariffs, said it “took account of likely impacts on US consumers, and involved the removal of subheadings identified by analysts as likely to cause disruptions to the US economy.”

But Lewis Alexander, chief US economist at Nomura, said the sheer scope of the US’s tariffs — just under 50% of all Chinese imports would be subject to levees if Trump’s latest threat comes to fruition — there is no way for the Trump administration to avoid slamming American households with price increases.

“The new list, targeting $200 billion with a 10% tariff, is almost equally split between capital and consumer goods,” Alexander wrote in a note to clients. “Thus, if these tariffs do indeed take effect, there would likely be a larger impact on consumers than in the initial round.”

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said this new focus on everyday goods would result in inflation, or price increases, on the consumer price index, or CPI.

“The consumer goods subject to the new tariffs together account for almost 6% of the core CPI,” he said. “Assuming no supply-chain margin compression — there will be some, initially — that means 10% tariffs would boost the index by up to 0.6%.”

Given that the Federal Reserve’s inflation target is 2%, a 0.6% increase in the CPI index would be substantial.

Warning signals have already emerged that suggest Trump’s tariff could cause prices to soar. Trump hit imported washing machines with a 20% tariff earlier in the year, and Thursday’s latest reading of the consumer price index shows the sudden skyrocketing cost.

“Laundry equipment products, which were subject to new tariffs starting in February, saw prices increase another 1.8% in June; over the past three months laundry equipment prices are up a cumulative 19.9%,” said Michael Feroli, a JPMorgan economist.

While Trump’s latest tariff proposal only applies a 10% duty to Chinese goods, US consumers would be subject to significant price pressures if the new restrictions result in even a small portion of the inflation seen in washing machines.

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Source:: Business Insider

      

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