It seems like every week there’s a new tariff being threatened. So, what could actually end up costing us more in this escalating trade war? The list is longer than you might think.
Back up. What trade war?
In case you missed it, President Donald Trump has been imposing tariffs—special taxes on imported goods and services, making them more expensive—on various products, such as solar panels and washing machines, and materials, including steel and aluminum. Tariffs on aluminum and steel imports from the European Union, Mexico and Canada took effect June 1.
New tariffs were applied to $34 billion worth of products from China in early July, with more scheduled to hit another $16 billion worth soon. In retaliation, Beijing is imposing tariffs of their own on $50 billion worth of imported American goods.
Now, Trump is threatening to add another 25-percent tariff (up from his original proposal of 10 percent) on another $200 billion worth of Chinese imports, and China is planning to hit back with 5- to 10-percent duties on another $60 billion worth of U.S. goods.
Why would this administration want to make things cost more?
America First. Trump says the tariffs are an effort to end “horrible Trade Deals [sic]” that treat the U.S. unfairly. The logic goes that taxing imports discourages us consumers from buying them, punishing the affected foreign countries both by raising their costs and lowering their revenues. At the same time, the hope is that we wind up opting for domestic goods, helping to prop up American companies and workers.
How’s it working so far?
According to tweets from @realDonaldTrump on August 4, “tariffs are working far better than anyone ever anticipated… [and] have had a tremendous positive impact on our Steel Industry [sic].” Earnings reports from U.S. steel manufacturers support the second claim, with some companies posting record sales thanks in part to U.S.-made steel prices rising 41 percent in 2018, according to S&P Global Platts.
But tariffs have been less beneficial for companies like Harley-Davidson, General Motors, General Electric, 3M and several other U.S. companies, which have all warned that the rising costs of raw materials are eating into their profits. The retaliatory tariffs have also hit U.S. farmers, as demand for many agricultural exports has dropped.
What does all this mean for me as a consumer?
Overall, it’s not great news for budget-conscious shoppers. Those higher steel prices mean greater costs for many companies, foreign and domestic, and plenty are passing those costs on to consumers by raising prices. Some things we’re already paying more for: recreational vehicles, soda and beer. Winnebago Industries, an RV-manufacturer, Coca-Cola and Boston Beer have all announced plans to raise prices. Washing machines and solar panels were among the first products hit by tariffs. The price of a washing machine jumped 16 percent from March to May. Installing solar panels typically costs $500 to $1,000 more now.
The newly proposed tariffs would hit consumers even harder, raising costs on products across the board—ranging from furniture to pacemakers and ultrasound equipment to small appliances such as water coolers, mini fridges, thermostats and air purifiers.
Tariffs also threaten to drive up prices on new cars: Toyota says costs to make vehicles in the U.S. would go up by about $1,800 each while imported models would cost $6,000 more each, and other automakers have made similar reports. More specifically, a new Toyota RAV4 (one of the most best-selling cars in the U.S.) could cost $6,400 to $9,400 more due to the proposed tariffs, according to a report from Experian.
What should I do about it?
Brace your budget for the higher costs. Overall, American households can expect already-imposed tariffs to cost them an extra $60 a year, on average, according to analysis from the New York Times. Including proposed additional tariffs more than doubles that annual cost to $127.
That might not sound like much, but the exact dollar amount, of course, depends on your spending. If you had planned to make big purchases—like buying a new car or washer—the higher costs due to tariffs are a much bigger deal to you. If you’re only paying a little more for your cans of soda, soup and beer, you may hardly notice a change.
Still, you know that any small amount saved and invested can grow into a fortune. So spending even a little more now can cost you more than you realize in the long run. (Not to mention, the trade war could lead to far bigger problems for our global economy.) Be sure to pay attention to your budget and how daily costs may be on the move. You may not be able to control trade policies and consumer prices, but you can take control of your spending and your own financial future.