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The Tariffs Will Bite U.S. Consumers: Prepare to Feel Their Effects More Than Before

August 2, 2019 in Economics

By Daniel J. Ikenson

Daniel J. Ikenson

Announcing his intentions on Thursday to hit all remaining
imports from China with tariffs, President Trump is now all-in on
the trade war. This doesn’t bode well for Americans’ wallets,
bilateral relations or the global economy.

As costly as this course of action will prove to be, it isn’t
hard to understand why Trump has continued down this treacherous
path. The adverse consequences of the trade war so far have been
contained. The president believes he has the leverage to bend
Beijing to his will. And if he were to ease up on the pressure,
Trump would be portrayed as weak by the dozen or more Democratic
presidential aspirants hoping to outflank him with protectionist
promises to win back Rust Belt voters.

A few words of advice: Go
shopping. Now! Buy your phones, laptops, clothes, furniture, hockey
gear, football helmets and hand tools now.

Tariffs on imports from China, which Trump first imposed last
summer, were gradually broadened and increased over the course of
the ensuing 12 months. As of this moment, U.S. Customs is assessing
taxes of 25% on about $250 billion worth of imports from China.
Most of those products are capital equipment and
“intermediate goods,” which is to say machinery, raw
materials and components required by U.S. producers to manufacture
their own output for sale in the United States and abroad.

Of course, those taxes get passed on to U.S. consumers in the
form of higher prices (to cover the higher costs of production) and
to workers whose compensation and hours worked suffer from their
companies’ dwindling profits. According to a report from the
Federal Reserve Bank of New York, “Over the course of 2018,
the U.S. experienced substantial increases in the prices of
intermediates and final goods, dramatic changes to its supply-chain
network, reductions in availability of imported varieties, and
complete pass-through of the tariffs into domestic prices of
imported goods.”

However, even though the costs are real and consequential, to a
large extent the pain has been dispersed and the cause and effect
has been hard for people to discern.

But as of Sept. 1, the remaining 55% of imports from China
(about $300 billion worth of mostly consumer goods) that have thus
far been spared the tariffs, will be taxed at 10%. A few words of
advice: Go shopping. Now! Buy your phones, laptops, clothes,
furniture, hockey gear, football helmets and hand tools now.

In 2017, the last full year before Trump’s punitive tariffs were
imposed, U.S. imports from China totaled $504 billion, and duties
paid by U.S. importers to U.S. Customs amounted to $13.5 billion.
That’s an average applied tariff rate …read more

Source: OP-EDS

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