Economists warn of ripple effects as supply chains break and prices climb
The blanket 10 percent additional tariffs on Chinese imports would cost a typical US family $223 a year, according to a new study by The Budget Lab at Yale University, as researchers caution that the indirect pain from the duties is even larger.
The new tariffs, which went into effect on Feb 4, are expected to raise the overall price level in the United States by 0.1 percent, equivalent to a nearly $20 decline in monthly disposable income per household, the study found.
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"The policy raises roughly $400 billion over 10 years, but less when the — 0.1 percent lower level of GDP that results is taken into account," the research center said.
US President Donald Trump also proposed sweeping tariffs on the US' two other top trade partners, Canada and Mexico, which are now on hold for a month. The full tariffs would cost the typical family $100 a month, according to the study.
It said US buyers will soon face higher prices for Chinese imports, particularly for leather products, computers, electronics and optical products, electrical equipment and textiles, which are projected to see price hikes ranging from 0.5 to 0.7 percent.
Earlier research by institutions such as the Federal Reserve Bank of St. Louis has shown that for a substantial share of US imports (nearly one-third of products), China is the cheapest source; for those items, even a modest tariff can upend established supply chains and cost structures.
The bank noted that being the lowest-price supplier does not necessarily indicate China is cheaper at supplying the same goods that are sold by other countries at higher prices. Instead, it can also suggest that China has specialized in producing goods at lower price and quality segments within many product categories.
"This finding implies that shifting away from Chinese imports could lead to increased costs across a substantial share of US imports," the St. Louis Fed said. "It also points to the challenge of finding alternative suppliers able to match China's prices, which could be a significant hurdle in efforts to diversify supply chains."
Based on US trade data in 2023, electrical and electronic equipment tops the list of imports from China, valued at roughly $126 billion to $127 billion.
This category of goods will be hit hardest because of its massive import volume and the sensitivity of consumer electronics to cost increases.
It is followed by machinery, valued at about $86 billion, which will also be affected as a result of its high import value and the critical role it plays in both consumer and business sectors.
Direct cost
In another analysis published by the Peterson Institute for International Economics in Washington, researchers also noted that the direct cost of the Trump administration's new waves of tariffs would amount to more than $1,200 a year for the typical median US household.
"Trump has threatened the entire world with tariffs. Furthermore, governments abroad will retaliate," the institute's senior research fellows Kimberly Clausing and Mary E.Lovely wrote in a note on its website.
Future waves of US tariffs and retaliation will increase the substantial consumer costs alongside the other economic harms of tariffs: reduced economic growth, a shrinking export sector, and supply chain disruptions, they added.
Jason Furman, an economist and professor at Harvard University and a former chair of the Council of Economic Advisers of the United States, also noted that while the direct pain of tariffs is to the consumer's pocket, their indirect effect is even greater.
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The tariffs will make US manufacturing more expensive, as much of the US imports from China are not consumer goods but parts or machines used by manufacturing companies, Furman wrote in an article titled "The real pain of tariffs" on Feb 4.
The China tariffs alone will not have a noticeable macroeconomic effect, he wrote. However, the threat of more tariffs has raised inflation apprehensions and made the Federal Reserve cautious about further interest rate cuts.
Both would result in higher mortgage rates for homeowners and borrowing costs for businesses trying to expand, he added.
"The real pain that tariffs would cause may be evident enough that Trump will continue finding ways to minimize them while declaring victory," wrote Furman.
