25% tariff would hurt consumers, some fear
Consumers would face higher prices, job losses
Analysts predict sudden increase on Chinese goods will disrupt economy
The Trump administration’s 10% tariff on $200 billion in Chinese imports has been a nuisance, with many U.S. businesses absorbing the cost or working around it.
But President Donald Trump’s threat over the weekend to hike the duty to 25% would dramatically compound the damage as the lion’s share of the costs are passed to consumers, taking a toll on the economy as well as company profits.
“A sudden tariff increase with less than a week’s notice would severely disrupt U.S. businesses, especially small companies that have limited resources to mitigate the impact,” says David French, senior vice president of government relations for the National Retail Federation. “American consumers will face higher prices, and U.S. jobs will be lost.”
The tariff would affect nearly 6,000
products and parts, including many consumer items such as furniture, clothing, electronics, handbags, luggage, hardware, shampoo, perfume, dishes, bedsheets, bicycles, meat and cereal. New-vehicle prices also could rise as parts from China become more expensive, Bank of America Merrill Lynch auto analyst John Murphy said in a research note Monday.
AudioControl, which makes highend audio equipment, imports about 25% of its parts from China, says Alex Camara, CEO of the Seattle-based company. Of the 10% tariff, he says, “We’ve primarily absorbed the cost, which has been painful.”
But if the tariff climbs to 25%, “it’s impossible to absorb,” he says. “10% has hurt our margins, but 25% is a severe impact.” And with the higher tariff slated to take effect Friday, he says, “You can’t even plan for that.”
Camara estimates he would have to raise overall prices to dealers and retailers by 8% to 12%, costs that would be passed to consumers and that could crimp sales.
All told, the 25% tariff on the $200 billion in Chinese imports, along with existing duties on $50 billion in Chinese shipments and on steel and aluminum, would reduce U.S. employment by 934,000 and cost the average family of four $767 a year, according to a study by the Trade Partnership. Trump’s threatened 25% tariff would make up a significant portion of that toll.
Put another way, Trump’s levies on the total $250 billion in shipments from China have barely been a blip for the economy, trimming growth by an estimated tenth of a percentage point for all of 2019, according to Oxford Economics. But increasing the tariff on the $200 billion in imports to 25% would triple the impact to three-tenths of a percentage point, taking a substantial bite out of U.S. growth that many economists forecast at about 2.2% this year.
Trump also has threatened to slap a 25% tariff on the remaining $325 billion in imported goods from China “shortly.” Such a move, along with the other duties, would cost the U.S. 2.1 million jobs and the average family of four more than $2,000 a year, the Trade Partnership study says.
The outlook isn’t all bleak. Some industries are expected to add jobs as the tariffs lead some businesses to buy U.S.-made goods, including steel, textile, apparel and electronic equipment manufacturers.