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CONSUMER (UN)CONFIDENCE

These China-made goods will soon cost more thanks to Trump’s tariffs

U.S. President Donald Trump and China's President Xi Jinping at G20 in Japan in June.
Reuters/Kevin Lamarque
Americans will be paying more for all manner of products while these two try to hash things out.
  • Ephrat Livni
By Ephrat Livni

Senior reporter, law & politics, DC.

Published This article is more than 2 years old.

On Sept. 1, at one minute after midnight Eastern Standard Time, new tariffs imposed on Chinese products go into effect as part of US president Donald Trump’s escalating trade war.

Initially, when the September tariff list was issued this month, a 10% duty was to be imposed on the targeted items. However, soon after, Trump tweeted an additional imposition, bringing the rate up to 15%. Now, it’s official. American retailers are already warning that prices will go up, and that has consumers and companies alike concerned.

The list of items to be tariffed (below) is 122 pages long, covering everything from the strange, like saps and extracts of opium, to the dangerous, such as tanks and other armored fighting vehicles. More mundane items are also included—pipes, rags, pacifiers, and so on. Notably, all manner of meats, cheeses, spices, alcoholic beverages, and chocolates will also be impacted, in addition to clothes, footwear, furniture, and electronics, including popular Apple products.

Apple Watches, AirPods, HomePods, certain Beats headphones, and repair parts for iPhones will all be affected by the added tax. Apple has not yet stated whether it will raise prices. The company has been lobbying Trump all year not to impose tariffs, Bloomberg reports, and it is particularly exposed to the impositions.

Still, consumers do have time to buy many items at today’s prices before the holidays. Thanks to the efforts of White House aides, who wanted to save Christmas, a 15% tariff on additional made-in-China items—including iPhones—doesn’t take effect until Dec. 15. The president’s advisors reportedly warned him that added tariffs could ruin the holiday and, apparently, Trump was convinced (although he did quickly thereafter raise the tax from 10% to 15%).

The December list of tariffed goods is much shorter than the September compilation, at only 21 pages. It includes holiday items, such as Christmas ornaments and gifting favorites like laptops, cellphones, and video-game consoles.

How soon consumers can expect to feel the tariffs when they shop depends on many factors. Like Apple, not all retailers have made it clear whether they will raise prices or when. Some may be better supplied than others and could have stocks unaffected by the duties available for a while. What’s certain, however, is that sooner or later, either companies or consumers or both groups will feel the effects of the trade war in their profits, purchasing power, and economic prospects.

American  consumers are clearly worried, according to the University of Michigan’s latest Consumer Sentiment Index, which is based on monthly surveys of nationally representative population samples, conducted throughout each month by phone. The index posted its largest monthly decline in years in August, falling 8.6 points to 89.8 from July’s 98.4. The last time there was a more dramatic drop was in December 2012, when it fell 9.8 points.

Economist Richard Curtin, who directs the surveys, explained in a statement yesterday that the latest decline is based on strain caused by the tariffs, which were spontaneously noted by one in three people surveyed, whereas the 2012 decline in confidence was based on concern over rising taxes and government spending. “The August data indicate that the erosion of consumer confidence due to tariff policies is now well underway,” Curtin said. “Compared with those who did not reference tariffs, consumers who made spontaneous negative references to tariffs also voiced higher year-ahead inflation expectations, more frequently expected rising unemployment, and expected smaller annual gains in household incomes.”

The economist argues that Trump’s tendency to announce and reverse and then reassert tariffs has people rattled. It may have some merit as a negotiation tactic with China, but leaves American consumers fearful and hesitant to spend money. Curtin believes that the erosion of consumer confidence is difficult to reverse.

Trump and some of his economic advisers say the problem isn’t tariffs but all the gloomy economic talk surrounding the duties, which erodes consumer confidence. They blame the press and analysts for creating instability by discussing fears of a global recession.

Still, the president is a businessman, first and foremost. So he should be able to do the math. Obviously, imposing taxes on hundreds of billions of dollars worth of products that are bought and sold in the US—and firing off rate hikes via Twitter—is bound to give people jitters and have a deleterious effect on the economy.

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