Trump's threatened tariffs would raise prices for toys, electronics, footwear, and other Chinese imports

Trump's threatened tariffs would raise prices for toys, electronics, footwear, and other Chinese imports

Description

American buyers will soon face higher prices for foreign-made goods if President Donald Trump follows through on his campaign trail threats to impose a tariff as high as 60 percent on all imports from China. The tariff would boost the costs of machinery, electronics, transportation equipment, and chemicals flowing into the United States from China with much of the burden falling on US-based businesses. Consumers would also see prices rise on electrical devices, toys, vegetable and meat products, and other goods from China.

China is the dominant supplier to the United States of toys and sports equipment, provides 40 percent of US footwear imports, and is the source of one-quarter of US electronics and textiles. Proposed tariffs of up to 60 percent on China would be a major shock to international goods markets.

Three categories of Chinese imports currently face average tariff rates below 10 percent—toys and sporting equipment, minerals, and electronics and electrical machinery. Of these sectors, the United States relies most on China for toys and sports equipment. While toys seem like products for which substitute sellers would be readily available, China maintains a dominant position in toy production for several reasons, including its not-easily-reproduced capacity to produce materials that meet US product safety standards. Toys and sports equipment are currently very lightly taxed, and new tariffs will be felt directly by American households.

While the ultimate impact on US prices will depend on import demand and supply elasticities, research on the US-China trade war has found resounding evidence of complete pass-through of tariffs to importers. This implies that American consumers and firms will bear the effects of higher tariffs, with substantial costs for the average American household and a burden that falls more heavily on lower income households.

This PIIE Chart is adapted from Julieta Contreras, Mary E. Lovely, and Jing Yan’s blog post, No trade tax is free: Trump’s promised tariffs will hit large flows of electronics, machinery, autos, and chemicals.

More on This Topic