Delaying tariffs shows Trump facing reality
China not alone in paying the price, president indicates.
President Donald Trump’s tariffs on Chinese imports are forcing Americans to pay more for everyday products. Many economists have shown this. If you look at the appropriate inflation data, like the rising price of imported home furnishings, you can see the effect for yourself.
Trump still does not see it — he continues to claim China alone is bearing the costs of his trade war with Beijing. But he admitted at least the possibility that he could be wrong about that on Tuesday, conceding that Americans could start paying more for many products if his latest round of tariffs went through as planned.
He acknowledged that when the administration said it would delay imposing a 10% tax on some Chinese goods, including electronic devices and toys, to avoid putting a chill into this year’s holiday spending.
“We’re doi n g this for Christmas season, just in case some of the tariffs would have an impact on U.S. customers,” Trump said, before veering back toward his usual line by adding, “which, so far, they’ve had virtually none.”
Continuing his remarks, the president again swung between both positions. “The only impact has been that we’ve collected almost $60 billion from China — compliments of China,” he said. “But just in case they might have an impact on people, what we’ve done is we’ve delayed it so that they won’t be relevant for the Christmas shopping season.”
There were at le a st a couple of inaccuracies in Trump’s comments, starting with how much money the Treasury had collected as a result of the tariffs. The Customs and Border Protection agency puts the figure at $24 billion through Aug. 7 — less than half of what Trump claims.
But his concession that consumers could wind up paying more for holiday gifts because of the tariffs is true based on the best available research on who is footing the bill for the trade war so far.
The reality of what economists call the “incidence” of Trump’s China tariffs is a complicated tale of profits, supply chains, competition and policy design. Here’s what we know about it to this point.
Tariffs small, but they’re growing
When Trump first imposed tariffs on Chinese imports last year, he targeted $50 billion of goods that were mostly the kinds of things that American companies purchase to manufacture other products, and not items that shoppers typically buy at the mall or online.
He later imposed tariffs on an additional $200 bil- lion of Chinese goods, ini- tially at a rate of 10% and then at a rate of 25%. That batch of tariffs affected more consumer products than the first round, but popular retail goods like clothes and cellphones were left off the list.
This month, Trump threatened a 10% tariff on about $300 billion in imports, or almost all of the Chinese goods that had not yet been taxed. Some of those tariffs will take effect on Sept. 1 as planned. The move announced on Tuesday, which also excluded some products, like car seats, from the new tariffs entirely, means a large swath of Chinese imports won’t be hit with tariffs until Dec. 15. That effectively staves off any tariff-related price increases for those products until after hol- iday shopping has started.
Thus far, the tariffs have not been a huge burden for consumers. Data from the customs agency shows that all of the China tariffs together raised $24 billion through Aug. 7. That works out to roughly a 5% tax rate on the total value of imports from China since Trump first began imposing the levies. As the list has grown, the pace at which revenue from the tariffs is collected has increased. The next round of tariffs will accelerate it even further.
Tariffs have already raised some prices
Inflation remains below the Federal Reserve’s 2% target rate, a fact Trump some- times cites as evidence that the tariffs have not raised prices. That’s a leap of logic. The overall inflation rate is too broad, encompasses too many prices and is affected by too many other factors to declare there has been no effect on consumers.
In February, economists at the Federal Reserve Bank of San Francisco estimated that the first wave of China tariffs would raise the inflation rate by 0.1 percentage points. They predicted that a possible expansion to 25% tariffs on all Chinese imports, still short of what Trump has announced, would add an additional 0.3 percent- age points.
Goldman Sachs research- ers echoed that finding in a note this week. They did so by analyzing changes in inflation for a group of goods that has been, or is about to be, directly affected by the tariffs. The sample is narrower than the one that determines the overall inflation rate, which makes tariff-related movement easier to spot.
“Our analysis of consumer prices, imports and tariff rates in tariff-affected goods categories suggests that most tariff costs were passed on to consumers,” the analysts wrote, “and that there were sizable price spillovers.”