Tuesday, August 28, 2018

Proposed Tariffs and Higher Retail Prices

By Steve Stapleton

The Trump administration has threatened to impose another $200 billion in tariffs on Chinese goods.  The National Retail Federation published a study on August 23, 2018 outlining the likely effect such tariffs would impose on the American retail consumer.  A copy of the study can be viewed here.

The study (which limited its focus to the effect on furniture and travel goods imported from China) concluded that the tariffs will cause retailers not only to raise prices, but to seek out new sources of supply.  Jonathan Gold, the National Retail Federation’s vice-president for supply chain and customs policy, in testimony prepared for a hearing before the Office of the U.S. Trade Representative, said, “By now the administration should know something it questioned several months ago:  Tariffs will not get China to change its unfair trade practices.  Instead these tariffs threaten to increase costs for American families and destroy the livelihoods of U.S. workers.”

Alternative Supply Does Not Equal Lower Prices…

The National Retail Federation study found that a tariff of twenty-five percent on furniture from China would lead to American consumers paying $4.6 billion more each year even if retailers find new sources of supply.  Similarly, a twenty-five percent tariff on travel goods, such as luggage and handbags, would cost American consumers an additional $1.2 billion a year.

Interestingly, the threat of tariffs has already led to higher prices. 

Gold, in his prepared remarks said, “While you may think [alternative sources of supply] is a positive development, the administration needs to know that the scramble [to find alternative supply sources] is already bidding up prices for consumer products from all possible alternative manufacturers.  Therefore, even if the administration decides not to impose the tariffs, higher prices are already on the horizon for American families.”

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