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US Trade Representative Robert Lighthizer has confirmed the tariff hike from 10% to 25% on $200 billion worth of Chinese imports that President Trump threatened via tweets on Sunday, Retail Dive reports.
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Lighthizer cited a retreat by China from commitments made earlier in the negotiations and said that the US would reconsider the increase if trade talks got back on track. Those talks are set to resume Thursday in Washington, D.C., The Wall Street Journal reports.
Here’s what it means: This round of tariff increases is set to affect products that consumers purchase directly.
Previous rounds of tariffs focused on items purchased by US manufacturers and businesses, shielding consumers from their direct effects. The 25% tariffs set to take effect on Friday will affect over $40 billion of items that consumers themselves purchase, like furniture, handbags, and clothing, where previously only around $1 billion worth of such goods had faced tariffs this high.
One product that previously faced similarly high tariffs was washing machines, which were slapped with a 20% duty in January 2018. The tariff ended up costing US consumers $1.5 billion over a year as appliance makers increased costs in response, according to a study by researchers at the Federal Reserve and University of Chicago cited by The WSJ.
Now it’s estimated that the new tariff hike will cost the average four-person US family $767 per year, per a study by Trade Partnership Worldwide cited by The WSJ.
The bigger picture: If consumers get pegged with higher costs, it’s likely to rattle their confidence and could damage US retail performance this year.
2019 has been an up-and-down year for retail, but higher tariffs could lead it to take a turn for the worse. Following a very weak December 2018, January saw promising retail results in the US, which was then followed by a small month-to-month decrease in February and a subsequent upturn in March.
This turbulent performance makes it tough to predict where the retail sector is going in 2019, but if increased tariffs cause higher prices on consumer goods, consumers will have less buying power. This could discourage them from spending and cause retail on the whole to start a decline from which it may be difficult to recover.
And with President Trump also considering expanding the 25% levies to everything that the US imports from China, the problem may only be exacerbated if the US and China can’t come to an agreement soon.
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