Forecast: Trump’s tariffs could cost US families up to $1,000 a year
WASHINGTON — More than a year into the U.S.-China trade war, American consumers are about to find themselves squarely in the crosshairs for the first time, with the average household facing up to $1,000 in additional costs each year from tariffs, according to research from JP Morgan.
Consumers, whose spending fuels about 70 percent of the U.S. economy, have been shielded from previous rounds of tariffs, which have left businesses reeling and upended global supply chains. But that’s about to change with the 10 percent levies on roughly $300 billion in Chinese imports, about a third of which will take effect Sept. 1. Those tariffs will primarily target consumer goods.
The effect of these tariffs is so significant that it caused President Donald Trump to publicly acknowledge, for the first time, that American families will bear some of the burden of his trade policies. Amid growing concern that the tariffs could damage the economy, Trump abruptly announced he would delay tariffs on certain popular products like laptops, footwear and video games — about two-thirds of the impacted items — until midDecember.
“What we’ve done is we’ve delayed it so they won’t be relevant in the Christmas shopping season,” Trump said last week.
But that’s not enough to eliminate the added burden for consumers. JP Morgan researchers calculated that the 10 percent tariffs would cost American households about $1,000 annually. If the tariffs are raised to 25 percent, as Trump has warned, consumers’ costs could go as high as $1,500 a year, researchers estimated.
“The impact from reduced spending could be immediate for discretionary goods and services since tariffs are regressive,” JP Morgan researchers wrote in a note last week. “Unlike the agriculture sector which is receiving subsidies/aid to offset the impact of China’s retaliatory actions, there is no simple way to compensate consumers.”
For consumers, the tariffs fallout will be big enough to erase the benefits of Trump’s 2017 tax cuts, which boosted many families’ take-home pay by several hundred dollars last year, according to the Tax Policy Center.
The blow to consumers comes as signs of a broader economic slowdown are surfacing around the globe. Central bank leaders in Europe, Australia and Asia have slashed interest rates in recent weeks, attributing the need for economic stimulus to the dampening effect of the trade war. Germany and the United Kingdom have reported shrinking growth, and economists fear both are teetering on the brink of a recession.
And China, which has seen its economic growth fall to the slowest pace in nearly 30 years, announced a de facto rate cut of its own over the weekend.