145% Tariffs? What Trump’s Additional Tariffs on China Could Mean for Consumers’ Wallets
Written by
G. Brian Davis
Edited by
Jenna Klaverweiden
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As of this writing, the current U.S. tariff rate on Chinese imports is 145%. Whether it will stay there is anyone’s guess.
If the U.S. does continue to impose triple-digit tariffs on goods imported from China, how could it affect your wallet?
Higher Prices on Consumer Goods
Tariffs are taxes imposed on companies that import goods from another country. But importers don’t just eat the extra costs. If importers end up passing on those costs, consumers could be affected.
“Companies pass along this cost to the consumer so they can continue to make a profit,” explained Ryan A. Hughes, financial advisor and founder of Bull Oak. “Americans will have to pay the higher price.”
And make no mistake: The U.S. imports a huge amount of consumer goods from China. The Census Bureau reported that around $439 billion worth of goods were imported last year.
Nor does the cost impact only items assembled in China. It applies to all the parts manufactured elsewhere and then completed in the U.S. For example, nominally American car companies build their cars from parts manufactured in other countries, so tariffs could drive up the costs for cars across the board.
Broader Inflation
Unfortunately, inflation doesn’t stay isolated. It can to spill over into other goods and services, even those not directly hit by tariffs.
Frank Ready of Wolters Kluwer pointed to the latest data in its April Blue Chip Economic Indicators survey: “The surveyed economists now forecast a 70% probability that U.S. inflation will accelerate over the next six months, up from 50% last month.”
Some Goods No Longer Available
At 145% tariffs, there likely wouldn’t be a market for some goods anymore.
Consider Australian wine as a “case” study. When China imposed triple-digit tariffs on Australian wine imports in 2020, companies effectively stopped importing Australian wine to China, as reported by The Conversation. Any buyers who enjoyed Australian shiraz suffered as casualties of the trade war.
Trade War and Recession Risk
A trade war between the U.S. and China risks the stability of the entire global economy.
“A trade war between the top two economies in the world will almost certainly reduce global economic activity,” Ready said. “We are already seeing European countries looking to sign trade deals with China, as China is looking to offload its massive inventory levels.”
Hughes added that every single economist surveyed sees U.S. tariff policy as cranking up recession risk. “Fully 69% of respondents think that the near-term recession risk is significant,” he said.
Prolonged Stagflation
“Stagflation” refers to a period of stagnant economic growth coupled with high inflation. That makes it difficult for central banks to fight because each problem requires an opposite solution.
Central banks fight recessions by slashing interest rates to make it cheaper for consumers and businesses to borrow, buy more goods and hire more workers. They fight inflation by raising interest rates. Stagflation leaves them with no easy fix.
Worryingly, Hughes reported that its surveyed economists see a 63% probability of stagflation over the next 12 months.
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