Fore­cast: Trump’s tar­iffs could cost US fam­i­lies up to $1,000 a year

The Morning Call - - BUSINESS CYCLE - By Tay­lor Telford

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.

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