With Threatened Tariffs, Trump's China Trade War Could Cost American Households $900 Each Year

America's trade war with China could cost U.S. families $900 per year if the new tariffs threatened by President Donald Trump on Thursday are implemented.

Trump tweeted that he planned to levy minimum 10 percent tariffs on $300 billion more Chinese imports beginning in September. He said that the tariffs could rise to 25 percent or higher. Prior tariffs on $250 billion of Chinese goods imports have already hurt consumers and businesses, but the round threatened on Thursday would have a more significant impact. "Apparel, footwear, consumer electronics, and toys," will be most impacted if the new tariffs are implemented, Goldman Sachs said in a note seen by CNBC.

"What's really different about this next round of President Trump's tariffs is that they mostly hit goods bought by American consumers. For the first time, this means higher costs of clothing, shoes, toys, and a lot of consumer-electronics – all of those had been spared by Trump's trade war so far," Chad Bown, a trade policy expert at the Peterson Institute for International Economics (PIIE), told Newsweek.

Tariffs have a disproportionate impact on poorer Americans, because the added costs from protectionist measures eat up a larger proportion of their income. Even though wealthier individuals pay more money due to tariffs, that's because they're buying more products.

Trump's prior trade moves against China, which have resulted in 25 percent tariffs on $250 billion of imports and were last raised in May, were expected to cost about $500 per household annually, Oxford Economics told Newsweek. With the new threat on $300 billion more imports, the forecaster estimated that the announced 10 percent tariffs would cost households an average $700, an amount that would rising to $900 if Trump ratchets up the tariff rate to 25 percent.

The Peterson Institute has issued a higher projection, estimating that if all tariffs reach 25 percent, their direct impact will leave households paying $1,270 more per year. And non-Chinese producers of tariffed goods have raised their own prices to profit from the trade wars, which PIIE said could further exacerbate the cost to consumers.

After Trump threatened to impose tariffs on $300 billion of Chinese imports in May, hundreds of business leaders cascaded into Washington to describe the detrimental impact of such a move. Trump has focused on China's alleged intellectual property theft and the trade imbalance between the world's two largest economies–America had a $419.2 billion trade deficit with China last year–when explaining why he is mounting the trade war. But many companies said in their testimony that tariffs on their products would unnecessarily hurt business and consumers, leaving them caught in a dispute that was unrelated to their industries.

The president's sudden announcement on Thursday, which came after top U.S. trade officials met with Chinese representatives in Shanghai, prompted another cascade of denunciations from business leaders.

"We all agree China is a bad actor, but an unprecedented tax hike on hardworking Americans is not the answer," said Jonathan Gold, a spokesperson for Tariffs Hurt the Heartland, a group of 150 of America's largest trade organizations representing retail, tech, manufacturing and agriculture. "It's time for the administration to come up with a real strategy, put a stop to harmful tariffs and finally deliver the trade deal Americans were promised."

The implementation of new tariffs could be a risky move for the president, who has regularly touted the ongoing economic expansion and his economic policies. The Washington Post found that, between July 2017 and May 2019, an increasing proportion of Trump proponents point to the economy as a reason for approving of Trump's job as president.

But his trade policies are negatively impacting economic growth. Federal Reserve Chairman Jerome Powell pointed to trade policy uncertainty and slowing global growth on Wednesday when announcing the first federal funds rate since 2008. Despite the continuation of a record-length economic recovery, manufacturing activity slowed to levels near a three-year low in July. Guided by the first contraction in business investment in three years, the GDP increased 2.1 percent in the 2nd quarter, a full percent drop from the year's first three months.

And while Trump has also promised to bring American jobs back to the U.S., his trade policies toward Beijing likely won't accomplish that.

"We have been increasingly a services-oriented economy, and that is likely to continue," Lawrence White, an economics professor at NYU's Stern School of Business, told Newsweek last month, describing Trump's plans to revive the manufacturing sector a "pipe dream."

Instead, companies have begun shifting facilities to other countries, like Vietnam, while China levies retaliatory measures against the U.S. In addition to responding with its own tariffs, Beijing has lowered tariffs for America's rivals, putting U.S. businesses at a disadvantage.

Trump
President Donald Trump sits with Japan's Prime Minister Shinzo Abe and China's President Xi Jinping as they attend a meeting on the digital economy at the G20 Summit in Osaka on June 28. JACQUES WITT/AFP/Getty Images)
With Threatened Tariffs, Trump's China Trade War Could Cost American Households $900 Each Year | News