Economic Watch: Americans paying more for basics thanks to Washington’s tariffs against China

NEW YORK, July 26 (Xinhua) — An average U.S. household paid over 300 U.S. dollars more in 2023 due to Washington’s tariffs targeting imports from China, mainly because of higher tax burdens and market efficiency losses, said a Tax Foundation research published in June based on actual revenue collection data.

The actual cost is even higher, the researchers said, because the estimate does not account for lower incomes as tariffs shrink output or the loss in consumer choice as people switch to alternatives that do not face tariffs.

This situation highlights the consequences of protectionist measures championed by Washington politicians. Intended to shield domestic industries, the tariffs have instead driven up prices on everyday items, from footwear to luggage.

CUSTOMERS PAY

A suitcase sold at 100 U.S. dollars before Donald Trump’s White House imposed the tariffs now goes for about 160 dollars, and a carry-on that was 425 dollars is now 700 dollars, said Tiffany Zarfas Williams, owner of a small, independent retailer store, according to a recent CNN report.

“The economics on tariffs are really clear that they’re a tax increase that ultimately we pay,” Erica York, senior economist and research manager with the Tax Foundation’s Center for Federal Tax Policy, was quoted as saying by CNBC.

The Trump administration’s tariffs on thousands of products, valued at around 380 billion dollars, were equivalent to nearly 80 billion dollars of new taxes on Americans in 2018 and 2019, amounting to one of the largest tax increases in decades, wrote York on a blog in June.

The Biden administration has kept many of the tariffs, on over 300 billion dollars worth of goods, in place, though Biden slashed Trump’s tariff policy during the 2020 election campaign. In May, the White House announced additional tariffs on goods worth 18 billion dollars imported from China, equivalent to another tax increase of 3.6 billion dollars.

Trump has pledged to impose 10 percent tariffs on all U.S. imports including from Europe if he comes to power. The Republican presidential candidate also suggested he would impose tariffs of 60 percent or higher on all Chinese goods.

“If Trump is elected, and he carries out his campaign promises with respect to trade, U.S. inflation measured by the CPI will probably jump by 2 to 3 percentage points,” said Gary Clyde Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics.

RETAILERS PAY

While American consumers mainly feel the pinch, American businesses are hit by the iceberg underwater.

The family-run shoe seller Deer Stags, headquartered in New York City, has been importing most of its products from China since the 1980s, said Rick Muskat, the company’s president, in a CNN report.

The Trump administration imposed a 15-percent tariff on over half of footwear imported from China. The levy was later lowered to 7.5 percent upon implementation of the U.S.-China Phase One agreement in February 2020.

As Muskat found it hard to raise prices for the present product lines, he had to pass on the cost to new products, which are now additionally expensive.

“I developed a new style that never existed in our line before that’s subject to the tariffs. So when we do our calculations and try to maintain our margins, those shoes ended up costing more than they would have had the tariff not been implemented,” Muskat said.

Muskat hasn’t changed suppliers because he found relocating production would not compensate for the cost.

U.S. companies “have absorbed much of the higher costs associated with the tariffs by earning lower margins on their sales,” said a 2021 report by the International Monetary Fund.

IMPORTERS PAY

The ripples spread up the supply chain, passing part of the additional cost of imported materials to finished goods assemblers and distributors in the United States.

Lance Ruttenberg, chief executive of American Textile Company headquartered in Duquesne, Pennsylvania, sees its costs rising by millions of dollars each year for the imported Chinese materials it uses in pillows and bedding that are sold by U.S. brands such as Sealy and Tempur-Pedic.

With retail titans pressing the price down, importers took the blow and squeezed their profit margins.

“The retailers, our customers, had no appetite for accepting that price increase. And so what happens is the American manufacturer winds up absorbing it,” Ruttenberg was quoted as saying by a Washington Post report in June.

“As you develop products going forward using these new input costs, inevitably the price of the next generation of a product is higher than it would have been absent the tariffs being there,” Ruttenberg said. “So inevitably the prices of everything increase over time.”

In May, major U.S. brands, including Adidas, Columbia Sportswear and Nike, urged the Joe Biden administration to end tariffs on footwear in an open letter to the U.S. president.

“We are confident that removing 301 tariffs will alleviate a costly burden in this key area and translate to savings for our shoppers,” they wrote, referring to the section of the law Trump used to impose the tariffs.

“Eliminating 301 tariffs on footwear will strengthen U.S. workers, businesses, and consumers,” the letter said.