Do these tariffs really work?

Mar 06, 2019 | Jeremy Goldfarb


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Recent reports show that the US consumer bore the brunt of the recent trade spat with China. It's still not over and now Trump has his sights set on India. It's far too early to tell who will win, and someone will always feel compelled to declare a winner. In the short term however, are consumers able to change their purchasing behavior quickly enough to toggle to domestic suppliers? That's what ultimately makes the tariffs bite. Only trade balance data and domestic company performance will tell the tale.

 

A study by the National Science Foundation estimated that imports on Chinese goods as well as levies on steel and aluminum resulted in $69 billion in additional costs to the American consumer last year. "U.S. consumers bear the incidence of the U.S. tariffs," the authors of the study said. They added that the federal government benefited from the tariffs by collecting an estimated $39 billion last year. Overall, the study estimated the total impact on the U.S. economy was a $6.4 billion hit, which is marginal given the economy’s total size of $21 trillion. Another study by the Centre for Economic Policy Research came to a very similar conclusion: "We find that the U.S. tariffs were almost completely passed through into U.S. domestic prices." U.S. importing companies were able to raise their prices when the tariffs were imposed on foreign competition.