- Current and potential trade actions by the U.S. and its trading partners could impact over $1 trillion worth of U.S. imports and exports.
- Americans will suffer losses of $2,357 per household from trade measures.
- The primary sources of loss are lower wages, lower investment returns and higher prices.
It’s now been over eight months since President Donald Trump initiated tariffs against major U.S. trading partners. On March 8, Trump issued two proclamations that authorized tariffs on aluminum and steel products, which then went into effect on March 23. In response, several suppliers of aluminum and steel have enacted reciprocal tariffs against American imports into their countries.
When it comes to talk of tariffs, much of the discussion is macroeconomic. But Americans should understand that tariffs affect them on a micro-scale, on a personal level — and namely in their wallets.
How Much the Trade War Is Costing Americans
The projected impact of Trump’s trade tariffs on the average American will be detrimental, according to a report by international trade consulting firm ImpactECON. In 2019, Americans are expected to get hit with losses equal to $2,357 per household — or $915 per person in 2017 dollars. Over time, these losses due to tariffs will accumulate, growing to the equivalent of $17,276 per household by 2030.
Where does this dollar figure come from? The primary causes of this financial loss are lower wages, higher prices and lower investment returns. Incomes will fall as a result of U.S. trade actions and reciprocal moves by foreign countries since America’s tariff policy will cause the GDP to shrink by a projected 1.78 percent in 2019.
Higher prices are the second key factor contributing to this $915 loss per person. Prices usually increase when the U.S. implements tariffs, which impacts consumers directly. Higher consumer prices only worsen the decline in wages because now people are spending even more of their already insufficient income.
Last, investment returns will decline, contributing to the $915 loss Americans are projected to take next year. The drop in investment is due to a fall in rates of return to capital, aka goods, as tariffs are put up by both the U.S. and its trading partners.
In raising these tariffs, two factors combine to undermine investment returns. One is that the increases in these tariffs will increase the cost of investment-type goods, such as cranes, steel, machinery and similar, which raises the cost of newly built domestic capital. And two, lower overall output reduces profits to existing capital goods. Put another way: Capital goods are both more expensive and the return to those investments are lower.
Click through to see how the prices on your favorite items could change due to tariffs.
More on the Economy:
- We Crunched the Numbers and the Mars InSight Probe Is Actually a Bargain for Taxpayers
- Watch FedEx to Protect Your Investments During Trump’s Trade War
- These 12 States Are Getting Hit Hardest by Trump’s Tariffs
- Watch: Best and Worst States for the Middle Class
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