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U.S. Consumers May Bear Brunt of Trump’s Tariffs

by AFP

Drew Angerer—Getty Images North America—AFP

Observers say risk to U.S. buyers increase with every escalation in U.S. president’s trade war with China

A universe of Chinese-made goods found in every American home is now subject to the sprawling tariffs imposed by President Donald Trump, with the brunt of costs to be borne by U.S. consumers, key drivers of the American economy.

Shampoo and furniture. Vacuum cleaners, handbags and mobile phones. Half of everything Americans buy from China will be, by Monday, subject to 10 percent levies, rising to 25 percent about three months later.

“Every time this trade war escalates, the risk to U.S. consumers grows,” Matthew Shay, president of the National Retail Federation, said in a statement following the announcement of Trump’s latest China tariffs. “We cannot afford further escalation, especially with the holiday shopping season right around the corner.”

Trump’s new protectionist measures now cover some 11,400 Chinese-made goods, or about $250 billion in annual imports at current levels, according to official documents and trade data.

According to Chad Bown, a trade expert at the Peterson Institute for International Economics, by the time of November’s mid-term elections, “40 percent of total U.S. imports could be hit by new tariffs that Trump imposed in 2018 alone.” While the Trump administration may downplay the risks, economists have long warned that mounting tariffs will ultimately have to come out of individual Americans’ pocket books.

Trade is among U.S. households’ biggest worries, according to a regular University of Michigan survey of consumer sentiment. The breadth of products concerned, produced by most industrial sectors, and their number, could cause see some consumers cut their spending.

But household spending, an historic driver of the American economy, has risen for a generation on the back of cheap, Chinese-made goods that U.S. consumers buy casually, dispose of and replace.

In American shops and major retail outlets like Walmart, shoes, clothing and electronics made in China are unavoidable. American consumers can be particularly price-sensitive, moderating nationalist sentiment if it means spending more.

Opinion polls showed last year that a large majority preferred to buy American goods if foreign-made equivalents were priced the same. But their numbers dwindled as U.S.-made goods became more expensive.

Economists expect a bump in prices for Chinese-made merchandise will see sales plummet.

The tariffs will affect a tiny fraction of U.S. gross domestic product, well below one percent, but the economic costs “are likely to be disproportionately felt by U.S. households,” according to Barclays.

Tariffs have already driven up prices for durable goods, with costs estimated at 0.6 percent of GDP, the bank’s analysts said.

A recent National Retail Federation study showed that border taxes on Chinese-made goods could cost American consumers as much as $6 billion a year. But consumers may have little alternative, as similar goods made elsewhere are even more costly, the federation said.

On Nov. 23, the day after the Thanksgiving holiday that retailers dub “Black Friday,” American consumerism is due to kick into high gear, marking the unofficial start of the Christmas shopping season. “The mere talk of tariffs on all remaining Chinese imports is of serious concern to retailers since tariffs of that magnitude would touch on every aspect of American life,” Shay said.

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