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US consumers may bear brunt of Trump's tariffs

The tariffs won't affect the US GDP by much, but their economic costs are likely to be borne by American households, said Barclays

A recent study found that the taxes on Chinese-made goods could cost American consumers as much as US$6 billion a year, but American consumers have little alternative, as similar goods made elsewhere cost even more.

Washington, D.C.

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 US consumers, key drivers of the American economy.

Shampoo and furniture, vacuum cleaners, handbags and mobile phones - half of everything Americans buy from China will by Monday be subject to 10 per cent levies, rising to 25 per cent about three months later.

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

American retailers, with their eye on Black Friday, the day after the Thanksgiving holiday which marks the unofficial opening of the Christmas shopping season, are worried that the tariffs will make consumers tighten their purse strings.

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Household spending, a historic driver of the American economy, has risen for a generation on the back of cheap, Chinese-made goods that US 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.

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

Chad Bown, a trade specialist at the Peterson Institute for International Economics, said that by the time of November's mid-term elections, 40 percent of total US 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 US 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 nudge some consumers into cutting their spending.

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 have dwindled as US-made goods have become more expensive.

Economists expect that a bump in prices for Chinese-made merchandise will depress their sales. The tariffs will affect a tiny fraction of US gross domestic product - well below one per cent - but the economic costs "are likely to be disproportionately felt by US households", said Barclays.

The tariffs have already driven up prices for durable goods, with costs estimated at 0.6 per cent 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 US$6 billion a year.

But consumers may have little alternative, as similar goods made elsewhere are even more costly, the federation said.

This year, Black Friday falls on Nov 23. The fourth Friday each November is when American consumerism kicks into high gear, as people start hunting down gifts for Christmas.

Mr Shay said: "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." AFP

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