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Experts: More tariffs will be costly to US consumers

By BELINDA ROBINSON in New York | chinadaily.com.cn | Updated: 2024-09-18 10:48
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American consumers could soon be stung with rising costs for buying imported goods, warn economists and retail trade organizations, after the Biden administration finalized tariff increases on certain products made in China.

"Lower-income US consumers will face the biggest consequences from the new tariff hikes," Thomas Fullerton, an American economist and economics professor at the University of Texas at El Paso, told China Daily.

"That is because they purchase more merchandise goods than services, and many of those goods are produced in China or contain components that are produced in China."

The Biden administration first proposed the higher tariffs in May on more than $18 billion worth of products from China. The tariffs are scheduled to start on Sept 27.

The tariffs will rise to 100 percent on electric vehicles (EVs), 50 percent on solar cells, and 25 percent on EV batteries, steel, lithium-ion batteries, aluminum and key minerals. 

Increased tariffs on semiconductor chips will take effect over the next two years, the Office of the US Trade Representative said. 

But the spike is likely to not only drive up costs for Chinese brands that ship to the US, but also for American companies and consumers who buy low-cost goods, say experts.

"A substantial portion, but not all, of the higher costs will be paid by US consumers," Fullerton said. "Chinese companies and US importers will also see reduced profit margins because not all the tariffs will be completely passed on in the form of higher prices."

The National Foreign Trade Council (NFTC), a trade association based in Washington, also has expressed concern about the impact that the tariffs will have on cash-strapped US households and importers.

"There is no question that tariffs raise costs for consumers, and adding new and expanded tariffs will harm working families and imperil America's national and economic security," NFTC Vice-President of Global Trade Policy Tiffany Smith told China Daily. 

"Tariffs are paid by US importers, not the Chinese government, and represent dollars that are no longer available for these companies to reinvest in innovation, employees, or expanding their businesses," she said. "The reality is that tariffs are blunt instruments that have not and will not resolve the complex economic challenges that exist between the United States and China."

She said that an analysis by the Tax Foundation found that the new tariffs proposed by the Biden administration in May would create an additional tax burden of $3.6 billion on US businesses and consumers. 

The updated tariffs came after a four-year review aimed at "strengthening protections for strategic industries", the US trade representative said on Sept 13.

In 2018, former president Donald Trump began the original tariffs that eventually covered more than $300 billion in imports from China, which later responded with its own tariffs. 

Biden not only kept Trump's tariffs in place but has increased the rate.

Vice-President Kamala Harris, the Democratic presidential candidate, hasn't detailed her tariff policy. 

Trump, however, has been clear.

He recently branded himself a "tariff president" and the US a "tariff nation" at a campaign rally in Wisconsin. 

Harris criticized his policy as a "sales tax" on American households and a "Trump tax". 

Trump said that it's "not going to be a cost to you. It's going to be a cost to another country." 

Numerous economists and retail organizations disagree. 

They have projected that if Trump enacts proposed tariffs of 10 to 20 percent on all goods and 60 percent on goods from China, it will ultimately hurt US consumers' wallets.

In the study, "Why Trump's tariff proposals would harm working Americans", by the Washington-based Peterson Institute for International Economics (PIIE), Kimberly Clausing and Mary Lovely argue that the tariffs could end up hurting Americans families, farmers and exporters the most.

The PIIE study said that "in contrast to Trump's frequent, and mistaken, claims that foreigners bear the impact of tariffs, economists have long understood that tariffs burden domestic purchasers of imported goods because imports are the difference between domestic demand and domestic supply a tariff affects both sides of the market".

Lovely is professor emeritus of economics at the Maxwell School of Citizenship and Public Affairs of Syracuse University and a senior fellow of the Peterson Institute.

She told China Daily: "We look at the effect of these proposals on American households as consumers of imported goods. The new taxes are economically significant — a household with median income is projected to pay $1,700 more each year in import taxes. 

"The new taxes are also regressive in the sense that they take a larger share of income from poorer households than richer households.''

The Center for American Action Forum, a liberal think tank, estimated that tariffs proposed by Trump could amount to a $3,900 annual tax increase for a middle-income family.

"Model simulations conducted by S&P Global Intelligence, Moody's Analytics, and the Wharton School of the University of Pennsylvania all confirm that tariffs are primarily paid by consumers within the United States," Fullerton said.

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