- Washington and Beijing have placed duties on hundreds of billions worth of each other’s products.
- The effects of protectionist policies tend to be unevenly felt by Americans.
- Economists say tariffs could most affect those who can least bear the burden of increased prices and retaliatory actions.
If President Donald Trump follows through with threats to escalate protectionist policies against China, consumers across the country are bound to notice higher prices and more difficult business conditions. But economists say negative effects won’t be evenly felt.
The two largest economies have so far targeted hundreds of billions worth of each other’s products. And as it continues to try to pressure Beijing to change policies seen as unfair, the Trump administration has prepared duties on another $US267 billion worth of products.
“People who shop at Walmart or Target are going to be hit harder than people who buy their toaster ovens from Williams Sonoma or can afford to get products from a higher-income country,” said Mary Lovely, an economist at Syracuse University who specialises in trade with China.
US officials initially sought to minimise effects on consumers, but that becomes increasingly difficult with each round of targeted products. A majority of items in the next tranche, which would effectively target every import from China, would likely be finished goods like clothing and electronics.
Importers can absorb the cost, pass it onto consumers, or change products altogether. For businesses operating at a slim margin, especially, paying a 10%-25% import tax isn’t an option. This can easily translate to higher prices for Americans who can least afford them, Lovely said.
“We have a very unequal distribution of the burden that is being felt by Americans as a result of the tariffs,” she noted. “It’s going to act just like a regressive tax.”
The same could follow for those most affected by retaliatory actions against the Trump administration. China has responded with duties on about 85% of American products it imported last year, including dozens of key agricultural items.
In September, the administration began distributing bailout checks to farmers who were poised to suffer financial losses from its policies. The tariffs come at a time of rising challenges for the industry, where bankruptcies have been on the rise.
China’s Xi Jinping and Trump are expected to meet in Argentina on Saturday, where the framework of a deal to defuse tensions could be on the table. But Washington has given conflicting signals on negotiations with Beijing in recent days.
One thing seems all but certain, however: another round of tariffs would be met with widespread opposition. The New York Times reported Tuesday that Trump is concerned about what impact his trade war could have on the performance of the stock market and the economy.
“I think that’s one of the reasons the Trump administration and the president himself have not talked recently about [additional tariffs],” said Nicholas Lardy, an expert on China at the Peterson Institute for International Economics. “A few months ago, he talked constantly about that. More recently, the frequency of threats to do this has declined dramatically.”
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.