Trump's China Tariffs Will Cost US Families $1,000 Annually, JP Morgan Warns

The U.S tariffs on China are burdening the American families and consumers more warned JP Morgan in an analysis. This contradicts the claims of the Trump administration.

Precisely, the tariffs are costing an average American family at least $1,000 a year, the study said.

The new trade war tariffs from September 1 at the rate of 10 percent on $300 billion of Chinese goods will escalate the burden by another $400 per household. Roughly half of the new tariffs will take effect on Sept. 1 and the rest from Dec. 15.

The existing tariffs are already costing every household $600 per annum.

Tariffs nullify gains of tax breaks

This effectively nullifies the cushion of tax breaks extended by Trump’s 2017 tax overhaul, which, comes to $1,300 per year.

JPMorgan estimates that the new tariffs will hit consumption and capital goods, unlike previous tariffs that were limited to intermediate goods or unfinished products sold to manufacturers. They did not pinch the consumer much.

“What distinguishes China Phase III tariffs from preceding tariffs is the impact to Consumption and Capital goods whereas previous tariffs focused more on Intermediate goods,” noted J.P. Morgan head of U.S. equity strategy Dubravko Lakos-Bujas in a note to clients.

The President’s repeated claims that the tariffs are to be paid by China had made hot Trump news. He also said tariffs will reduce the trade gap with China and bolster the U.S coffers.

Apple’s arguments

On Friday, a report by the New York Federal Reserve was more candid about how tariffs are hurting manufacturers in the state.

“For both 2019 and 2020, roughly two-thirds of manufacturers saw an upward effect on prices paid, and roughly 45 percent saw an upward effect on selling prices,” it read.

This means the cost of American manufacturers is going up, and many expect the cost of their products will also shoot up.

Trump is also becoming aware that this obvious dynamic is happening.

Trump’s meeting with Apple CEO Tim Cook made big Apple news as direct feedback by a U.S. manufacturer to the President on what is happening at the ground level.

Cook told Trump how tariffs are slumping Apple into a competitive disadvantage against rival Samsung because Apple's products are much more centralized in China than Samsung's. That means China-specific tariffs are taking a toll on its bottom line.

Apple has reasons to be concerned as it is bracing for the launch of its globally awaited iPhone 11 and is scared that Trump’s tariffs will play spoilsport on the last mile iPhone 11 price.

“It’s tough for Apple to pay tariffs if it’s competing with a very good company that’s not,” Trump told reporters, and he termed Cook’s argument “very compelling.”

One of the altruistic intents of Trump’s tariff has been that American manufacturers such as Apple will shift manufacturing back to the United States instead of producing goods overseas.

Now Trump looks convinced about the merits of Apple’s counterargument. The American company has said upfront that it is not China that is bearing the brunt of tariffs but the U.S company is suffering.

A previous study by the International Monetary Fund, Harvard University, the Federal Reserve Bank of Boston, and the University of Chicago also had the consensus opinion that the burden of China-tariffs is “largely on the U.S.”