President Trump’s recent increase in tariff rates on $200 billion worth of Chinese imports raises the overall cost of tariffs on Chinese goods for U.S. households to $106 billion a year, according to a new analysis published on the New York Federal Reserve Bank’s blog.
Individual households will pay $831 per year on average in added costs if the tariffs remain in place, the economists said. That roughly doubles the size of the impact from the previous tariff levels, which were costing households an estimated $419 on average per year.
The higher tariffs could lead to a drop in revenues for the Treasury Department, because the cost increase is so large that it will drive U.S. importers to look for alternative sources of goods, such as Vietnam. The substitute goods would likely be more expensive for consumers than before, but if they come from non-Chinese sources, they won’t provide a revenue bump for the Treasury.
“[A]ccording to our estimates, these higher tariffs are likely to create large economic distortions and reduce U.S. tariff revenues,” the authors Mary Amiti, Stephen J. Redding, and David E. Weinstein concluded.
Not coincidentally, retailers including Walmart, Target and Home Depot warned this week that the tariffs are causing them to review their financial outlooks and consider price hikes. "We're concerned about tariffs because they lead to higher prices on everyday products for American families," Target CEO Brian Cornell said Wednesday.
