How Tariff Hikes in China Could Cost You Money
As you may have heard, President Trump just raised tariffs on Chinese goods worth $ 200 billion from 10% to 25%.
Here’s how it might affect you.
First, you can see higher prices for everyday goods. As NPR explains:
To date, tariffs have had a significant impact on raw materials such as chemicals and wood beams used to make other products, so the increase in costs seems to be additional to the consumer. But the additional new tariffs will raise prices for more finished goods – things that consumers actually buy, like bicycles.
This latest round of tariffs will add another $ 500 a year to costs for the average American household, according to Catherine Russ, professor of economics at the University of California-Davis. And it could grow. President Trump has pledged to further expand tariffs on all Chinese imports, including high-value goods. “When tariffs go to cell phones, I mean then you will see people screaming,” she says.
Of course, this is not the first time that a tariff increase has led to an increase in consumer spending. Rolling Stone has a great explanation of how President Trump’s previous tariffs made life more expensive:
For example, washing machines. A recent study by two researchers from the University of Chicago and one from the Federal Reserve Board used the “washing machine case” to demonstrate the impact of Trump’s tariffs on consumer goods. What they found was ugly. Since Trump introduced tariffs on washing machines in January 2018, the average price for washing machines has risen 12 percent – or, as NBC News notes , between $ 86 and $ 92 per machine.
While consumers are suffering, manufacturers are doing well. As the Wall Street Journal points out, Whirlpool recently reported a 400 percent increase in quarterly profits from 2018 to 2019. They attributed this to “increased margins” as a result of “price action”.
This is how these tariffs (and the corresponding reciprocal tariffs) hurt consumers. The manufacturing, automotive and agricultural industries have already had to absorb higher costs and lower profits, and small businesses working with Chinese manufacturers are also likely to lose money.
The newest round of tariffs can also affect your retirement fund, at least for a while. In the Washington Post, Michelle Singletary suggests not looking at your 401 (k) balance until Trump’s trade war with China is over:
This week’s events are a good reminder that you probably shouldn’t watch your investments too closely. What fell one day may be the next. Or come back again and so on.
If you are investing for the long term, do not make hasty decisions based on daily market fluctuations.
It’s too early to predict all of the long-term implications of the current trade war, but if the next bike you buy is slightly more expensive than you thought, today’s new rates may be the reason.