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U.S. consumers and businesses -- not China -- bear the brunt of Trump's tariffs

U.S. consumers pay bill for China tariffs
Trump's new China tariff threats raise stakes for U.S. consumers 01:03
  • U.S. tariffs imposed on China and other countries have resulted in higher prices and costs for American consumers and businesses, studies show.
  • Republican-leaning counties around the country have taken a bigger hit than other areas.
  • Overall, the U.S. economy lost an estimated $7.8 billion because of the tariffs imposed on China and other countries last year.

In renewing a threat to sharply raise tariffs this week on hundreds of billions of dollars worth of goods from China, President Trump said in a tweet on Sunday that the levies have had little impact on U.S. consumers -- it is the Chinese who are bearing the brunt of the trade war between the world's two biggest economies, he claimed.

Yet research suggests otherwise, showing that American consumers and businesses are taking the biggest hit in the form of higher prices and costs. That's especially true in areas of the country that typically vote for Republican candidates, like farming communities in the Midwest, according to one recent study by economists from UCLA, University of California, Berkeley, Columbia University and the World Bank.

"The economic evidence to date on this is exactly the opposite of Trump's statement," Chad Bown of the Peterson Institute for International Economics and host of the podcast TradeTalks tweeted. "The impact of the 2018 tariffs has been passed on to U.S. consumers in the form of higher prices. China is NOT bearing the burden of Trump's tariffs."

Companies, not countries, pay tariffs

Mr. Trump said via Twitter that negotiations with China are progressing "too slowly," and he threatened to jack up tariffs on $325 billion in Chinese goods to 25 percent -- that would effectively impose a tariff on all Chinese products that enter the U.S.

As a result, American business that import items from China would face potentially higher costs. Tariffs are a tax that companies -- not countries -- pay on imported goods, for raw materials, parts and finished products. Companies facing higher costs for imports often pass those on to consumers in the form of higher prices. At the same time, the cost of goods the U.S. exports overseas may rise.

Pricier washers and dryers

Take washing machines. Washers imported to U.S. were one of the first products to be subject to higher U.S. tariffs last year under the Trump administration's protectionist trade stance. Washing machine prices rose 12 percent for U.S. consumers as foreign makers couldn't shift production to other countries.

Retailers also raised the price of dryers by the same amount even though they weren't subject to tariffs, a separate study from economists from the University of Chicago and Federal Reserve found. In total, over the course of a year U.S. consumers ended up forking out an additional $1.5 billion to buy washers and dryers. That came to between $82 and $92 per appliance. 

$3 billion in higher costs

Another study released this spring by economists from the Federal Reserve Bank of New York, Columbia University and Princeton University found that the burden of Mr. Trump's tariffs fell entirely on U.S. consumers and businesses that buy imported products. By the end of last year, companies were paying $3 billion a month in higher tariffs and absorbing $1.4 billion a month in higher costs. The researchers noted "that U.S. producers responded to reduced import competition by raising their prices."

Notably, tariffs have barely grazed the $22 trillion U.S. economy, which continues grow at a steady clip. Without tariffs, though, the expansion would be even bigger, the UCLA-led group of economists suggested.

U.S. and China to resume trade talks as Trump threatens to impose new tariffs 05:56

Republican counties "bore the brunt"

China and other countries fired back when Mr. Trump's tariffs took effect last year, both through retaliatory tariffs and shunning some U.S. exports altogether, like soybeans. That's exacerbating already difficult conditions in America's farming regions -- typically heavily Republican voting areas. The European Union taxed motorcycle exports, prompting Harley Davidson to open a factory in Europe rather than build them in the U.S. to ship overseas. 

"Workers in very Republican counties bore the brunt of the costs of the trade war, in part because retaliations disproportionately targeted agricultural sectors," researchers wrote in the UCLA-led study. When combined with protectionist policies that shielded some U.S. companies from competitive imports,  the U.S. economy lost an estimated $7.8 billion because of the tariffs imposed on China and other countries last year.

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