U.S. President Donald Trump finally slapped tariffs on $112 billion worth of products from China on Sunday, after making several threats. The move will exacerbate a trade dispute that has cast uncertainty on the economy.
A new 15% tariff
The new 15% tariff applies to far more consumer products than in previous rounds. China has stated it would retaliate. The administration had till now largely avoided hitting consumer items.
The U.S. now has plans to enact tariffs on virtually all remaining imports from China on December 15. Trump has also further plans to increase the tariff rate on $250 billion worth of products to 30% in October.
Many U.S. companies have warned the White House that they will be forced to increase their prices to make up for what they will pay on Chinese imports. Other businesses, though, may decide to absorb the higher costs.
An ongoing trade war
The Trump administration has been in an ongoing trade war with China for more than a year. The administration believes that China steals U.S. trade secrets and unfairly subsidizes its own companies.
In an attempt at getting Beijing to reform its trade practices, the Trump administration has imposed import taxes on billions of dollars’ worth of Chinese imports. Likewise, China has retaliated with tariffs on U.S. exports.
What is worrisome is that economic research has found that the costs of the duties fall on U.S. businesses and consumers. Taking this into account, Trump had delayed some of the duties until December 15, after the holiday season goods are distributed.
A J.P. Morgan study found that Trump’s previous tariffs will cost the average U.S. household $1,000 a year. This was before Trump raised the September 1 and December 15 tariffs up by 5%. That number would surely be higher now.