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NY Fed: Trump China Tariffs to Cost US Households $106B Annually

NY Fed: Trump China Tariffs to Cost US Households $106B Annually
Stuart Miles | Dreamstime.com

Thursday, 23 May 2019 03:31 PM

The newest round of U.S. tariffs on Chinese imports will cost the typical American household $831 annually, researchers said on Thursday, as the Trump administration came under growing political pressure over its trade war with China.

Washington this month hiked existing tariffs on $200 billion in Chinese goods to 25% from 10%, prompting Beijing to retaliate with its own levies on U.S. imports, as talks to end a 10-month trade war between the world's two largest economies stalled.

Research published by the New York Federal Reserve Bank estimated that as tariffs grow larger, importers have more of an incentive to switch to goods from more expensive countries. That could end up reducing the revenue the United States is able to collect from its tariffs on Chinese goods, the authors of the report wrote.

The report led by Mary Amiti, assistant vice-president at the New York Fed, estimates that the Trump administration’s increase in tariffs on $200 billion in Chinese goods will cost American households $106 billion a year.

“These higher tariffs are likely to create large economic distortions and reduce US tariff revenues,” the report, which was co-authored by Princeton’s Stephen Redding and Columbia University’s David Weinstein, warned.

Such “losses tend to rise more than proportionally as tariffs rise because importers are induced to shift to ever more expensive sources of supply as the tariffs rise,” the report said.

While many economists expect the tariffs will push U.S. consumer prices higher, U.S. Treasury Secretary Steven Mnuchin told lawmakers on Wednesday that rising tariffs on Chinese imports will not lead to significant cost increases for U.S. families.

A U.S. lawmaker from Iowa, one of the states considered especially vulnerable to the U.S.-China trade war, pressed Mnuchin on Thursday to explain his views.

"It appears beyond evident that consumers will pay this price," Representative Cindy Axne, a Democrat, said in a letter a day after Mnuchin appeared before the House of Representatives' Financial Services Committee.

In her letter, which was seen by Reuters, Axne asked Mnuchin to share the Treasury's internal research on how the tariffs could affect consumer prices.

Mnuchin has said some companies would source products from countries other than China, potentially shielding U.S. consumers from price hikes, and that currency effects, reduction in profit margins and other factors would also mitigate the impact of prices. 

© 2019 Thomson/Reuters. All rights reserved.

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The latest round of US tariffs on Chinese imports will cost American households $106 billion a year, research from the New York Federal Reserve has found. For the average family, the cost is $831 annually.
ny fed, trump, tariffs, china, american, households
Thursday, 23 May 2019 03:31 PM
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