President Trump's trade war with China is going to cost the typical American household hundreds of dollars a year, according to a Truthout analysis.
The website noted that Trump has slapped a 10 percent import tax on $200 billion worth of Chinese products sold in the United States, and plans to increase the tariff to 25 percent in early 2019. The president is calling for imposing taxes on an additional $300 billion worth of goods and services from China.
That would raise the total tariffs to $80 billion, which amounts to nearly $600 per U.S. household. However, the impact will probably be less severe than that because some American importers of Chinese products might not increase their prices. Market pressures could force firms to absorb the cost.
One outcome is certain: Americans, not China, will pay for the tariffs. Truthout argued that Trump “is effectively proposing one of the largest tax increases on the middle class in memory.”
The tariffs are a fulfillment of one of the president's campaign promises during the 2016 race for the White House. He told his supporters he would protect U.S. companies and workers by confronting China on its alleged currency manipulation, and by reversing America's trade deficit with the Asian giant. However, the tariffs are threatening to harm many of those who voted for Trump by raising the cost of products.
Despite assurances by billionaire Secretary of Commerce Wilbur Ross that most consumers will not notice the price hikes, personal-finance expert Chris Hogan told CNBC that “things are going to become more expensive because of this added tax.” He predicted that “this has the potential to impact a lot of areas that people need day to day to survive or to run their business.”
Chinese products sold in the United States that are subject to the tariffs include vegetables, seafood, chemicals, televisions, and other electronic goods, cars, washing machines, solar panels, clothing, beer, and cosmetics.
According to CNBC, a number of U.S. firms have said they will respond by raising prices. Among the companies are Walmart, Gap, Coca-Cola, and General Motors. Some Apple products are expected to get more expensive as well.
The New York Times reported that the cost of houses and construction materials will go up even more than they already have as a result of U.S. tariffs on lumber from Canada. Sandy Weaver of Petrovic Weaver Financial Services told the Kansas City Star that the taxes on Chinese products are “adding about $9,000 to the cost of the average single-family home.”
Trump contends that his tariffs will help U.S. companies by making their products and services cheaper than those from China, and create jobs by encouraging the firms to buy their supplies domestically.
Some industries are not seeing the benefits, and are instead being forced to reduce their payrolls or increase prices. Harley-Davidson recently predicted that its costs may go up by as much as $55 million due to Trump's tariffs on Canadian steel and aluminum. “Your Harley-Davidson motorcycle will likely dent your checkbook for an extra $2200,” the company announced.
“U.S. tariffs on Chinese imports can drive up prices for consumers, squeeze profit margins of the companies relying on those imports, or both,” Greg McBride, Bankrate's chief financial analyst, told CNBC.
Hogan advised shoppers to “slow down and really understand the difference between something (they) want and something (they) need.” He explained: “Upgrading a TV from a 50-inch screen to a 60-inch — that's not a need; that's a want.” David French of the National Retail Federation French said prices for big-screen televisions are likely to soar by hundreds of dollars.
Trump insists that his tariffs are necessary to reduce the United States' $50 billion trade deficit. In announcing one round of import taxes in June, he tweeted: “Trade must be fair and no longer a one-way street.” He wrote that “in the end, it will even out.”
About $375 billion of the trade imbalance is related to China, which is retaliating to Trump's tariffs with taxes on U.S. exports. Government officials in Beijing are preparing to slap tariffs on 5,000 American products worth about $60 billion. Experts are afraid that the fees will drive down sales for U.S. companies, which could compensate for their losses by laying off employees.
“Chinese tariffs on U.S. exports have a more concentrated impact, primarily hitting the revenue and production of U.S. farmers and manufacturers,” McBride said. “Better trade deals may well be a long-run result, but they won't come without some pain in the meantime.”
The BBC reported that the Chinese news agency, Xinhua, has accused the United States of “trade bullyism practices” by “intimidating other countries through economic measures.” The agency reported that Trump has launched the “largest trade war in economic history.” China recently called off scheduled trade talks with the United States.