The Trump administration’s new round of tariffs on Chinese goods went into effect despite warnings from analysts that the tariffs would amount to a huge tax hike on Americans.
The administration slapped a 15% tariff on $112 billion of Chinese products, including clothes, shoes, and electronics like televisions and video game consoles, Business Insider reported.
China vowed to retaliate with a new round of tariffs, including on American-made cars.
Though Trump has repeatedly falsely claimed that China is paying the tariffs, nearly all of the additional costs have been passed on to American consumers, amounting to a large tax hike on American families.
Trump acknowledged as much when he agreed to delay further tariffs until December so that he wouldn’t, as his aides told CNN, “ruin Christmas” for American families.
JPMorgan: Trump just hiked taxes by $1,000
Analysts at JP Morgan estimated that Trump’s tariffs had already hit the average American household with a $600 tax hike. The new round of tariffs means that Americans will pay an average of $1,000 more for year for products as a result of the tariffs.
“What distinguishes China Phase III tariffs from preceding tariffs is the impact to Consumption and Capital goods whereas previous tariffs focused more on Intermediate goods,” J.P. Morgan head of U.S. equity strategy Dubravko Lakos-Bujas said in a note to clients according to CNBC. “This suggests that the expected consumer impact should be larger in the latest round.”
Lakos-Bujas explained that while the Trump administration has been subsidizing farmers hit hardest by the trade war, “there is no simple way to compensate consumers.”
Tariffs could hurt last remaining positive economic indicator:
Despite stock market struggles and predictions of a looming recession, consumer spending has remained strong.
“Despite the larger tariff impact, the U.S. consumer appears strong. July retail sales grew more than expected from June and posted the strongest five-month growth streak since 2005-2006. About 70% of economic activity is tied to consumer spending,” CNBC reported. “Given the larger impact on the wallet of the U.S. consumer going in the 2020 election, Lakos-Bujas said the administration will likely rollback tariffs or compromise on a trade agreement.”
“We believe there is a good chance they end up reversing their decision and finding a way to reach some common ground with Chinese negotiators,” he said.