A hallmark of President-elect Donald Trump’s reelection campaign was a proposed increase in tariffs on goods coming into the United States. He proposed an increase of 10% to 20% on all foreign countries, with an additional 60% to 100% tariff on imported products from China.
The National Retail Federation (NRF) commissioned a study to determine how increased tariffs will impact the cost of imported goods in six categories: Clothing, footwear, toys, furniture, household appliances, and travel goods.
The study found that American consumers could lose between $46 billion and $78 billion in spending power each year the tariffs are in place if they are imposed.
“Retailers rely heavily on imported products and manufacturing components so that they can offer their customers a variety of products at affordable prices,” NRF Vice President of Supply Chain and Customs Policy, Jonathan Gold said in a news release announcing results of the study. “A tariff is a tax paid by the U.S. importer, not a foreign country or the exporter. This tax ultimately comes out of consumers’ pockets through higher prices.”
Augusta University Professor Rick Franza, an ABD contributor and former Dean of the Hull College of Business at AU, said he doesn’t anticipate a tariff increase will happen in the near future.
“Obviously, Trump doesn’t become President until January, and so it would take a while,” he told ABD. “But I would sense that there’s going to be. If he does what he says he’s going to do, tariff-wise, there will definitely be price increases. Tariffs are generally inflationary, because tariffs limit competition. And when you limit competition, prices tend to tend to go up.”
Franza said increasing tariffs, and the corresponding cost to purchase imported goods, could give domestic producers room to raise their prices. He said sometimes tariffs are necessary, but not always for the reasons primarily outlined in the election campaign.
Franza said tariffs generally fly in the face of what differentiates the US, which is free markets. More tariffs mean less free markets. He said he is not “anti-tariff,” however,
“They’re (tariffs) all “bad,” but put that bad in quotes,” he explained. “They’re bad from an economic standpoint, but sometimes, you need to do them from a national security standpoint. If somebody comes in and really, really undercuts you significantly, you need to use them in those cases where you’re protecting national security type efforts, if there are industries that might need some protection for national security purposes more than anything else.”
Should the tariffs be enacted, the NRF said the increased costs to sell the imported goods would be too high for U.S. retailers to absorb. The study broke down the possible impact in each of the six categories.
“Consumers would pay $13.9 billion to $24 billion more for apparel; $8.8 billion to $14.2 billion more for toys; $8.5 billion to $13.1 billion more for furniture; $6.4 billion to $10.9 billion more for household appliances; $6.4 billion to $10.7 billion more for footwear, and $2.2 billion to $3.9 billion more for travel goods,” said the study.
“So, my feeling is those tariffs may not be necessary. They will cause increased prices, and you’re not really protecting anything that’s important. What you’re doing is you’re doing populism, which is you’re telling people, ‘We’re going to make sure your company’s protected.’ And while that all sounds well and good to that manager, that employee, it’s not what’s good for the consumer, because it raises prices,” said Franza.
The NRF report said, while some U.S. manufacturers will benefit, those gains will not outweigh the negative impact on consumers. Low-income families will be especially hard hit.
While the President-elect consistently set his goal for increasing tariffs at 10% to 20%, Franza anticipates that will change.
“You got to remember Trump’s methodology is, ‘I’m going to throw this out.’ I think what he said, he said for two reasons. Number one was to get votes. The second thing is, Trump has a history of negotiating, and of course, he’s going to come out with 20% across-the-board tariffs. That’s his starting position for negotiation. So, he’s more pragmatic than that.”
The full NRF study can be found at https://nrf.com/research/estimated-impacts-proposed-tariffs-imports-apparel-toys-furniture-household-appliances
