US consumers to bear some pain from Trump's trade war

  • Wednesday 12, June 2019 10:38 AM
  • US consumers to bear some pain from Trump's trade war
Sharjah 24 – Reuters: The U.S. government claimed China would undertake 84 percent of cost for the tariff hike on Chinese products, but a Columbia University economist fired back by saying the duties will be actually paid by the United States itself.
David Weinstein is a professor of Finance, International Macroeconomics and International Trade at Columbia University. He with another two scholars made a report in March after analysing the Trump administration's tariff move on imports from China and drew a conclusion it is not Chinese enterprises that pay the bill but U.S. importers and consumers will.

"Clearly at this point, that's not what's going on. I think it is clear what is happening now, and what is happening now is that Americans are bearing the full cost of the tariffs," he said.

The tariff burden was transferred to U.S. importers and consumers as movements of supply chains from China to other producers brought up costs, the professor said.

"In the current trade war, we've been seeing a lot of movements of supply chains away from China and towards others producers in Asian countries, Vietnam, Thailand in particular. So what happens when you shift your supply chain is that you move from a low-cost supplier, say China, to a high-cost supplier. When that happens, you do avoid paying the tariff, but your imports now are more expensive," he said.

The team estimates that if current tariffs are placed for a whole year, a U.S. household will pay about 800 U.S. dollars a year for extra cost and the GDP cost will be 0.4 percent to the U.S. economy.

"So as a share of GDP, we are estimating the costs at around 0.4 percent of GDP. So that's a very substantial cost to the U.S. economy," professor Weinstein said.

The Trump administration raised tariffs from 10 to 25 percent on 200 billion U.S. dollars' worth of Chinese goods in early May and threatens to impose tariffs on additional 300 billion dollars worth of Chinese goods -- essentially all remaining Chinese imports.