The Ways Trump’s Trade War With China Impacts The US Economy

While President Trump continues to spar with China over trade tariffs, the U.S. potentially faces serious economic consequences, given the trade imbalance between the two countries.

Trump on Friday announced an increase in tariffs on Chinese goods from 10% to 25%. The increase only affects goods shipped from China on or after Friday. At this point, roughly $200 billion in goods, from soap to sneakers and food are affected. Earlier tariffs focused on industrial goods used to produce American products. In both cases, the increased cost of goods and materials will be passed on to American consumers.

While the American economy has increased by approximately 30% since Trump took office, those gains have not been felt in all sectors, including most American households. The recent tariff increase is estimated to cost an American family of four more than $700 per year, the Washington Post reported. Small and large businesses also will be affected, potentially slowing what recently has been a highly volatile stock market.

The president has said there is no rush in dealing with the trade discord, though some experts would disagree. Produced goods and some fabricated materials used by American companies to complete other products, such as bicycles or automobiles, likely will raise costs to end users, given manufacturers will pay more for those items.

The Hill and other publications have touched on things to consider when evaluating the impact of tariffs on the American consumer.

1. The tariffs imposed on Friday cover roughly half of the $535.5 billion in imports the U.S. generally receives from China per year, based on 2018 imports.

In an appearance Sunday on ABC's "This Week," Sen. Rand Paul, R-Ky., said that he wants the White House to quickly finalize a China trade deal.

"The longer we're involved in a tariff battle or a trade war, the better chance there is that we could actually enter into a recession because of it," Paul said.

2. China imports far less American goods than the U.S. receives from China. China in 2018 imported about $120.3 billion of American products — most of which are tied to the agricultural economy — which means American farmers are and will continue to pay a price for the tariff wars.

"Farmers, particularly soybean farmers, have been the tip of the spear when it comes to Chinese retaliation, and I'm not sure they can take much more," Kirk Leeds, CEO of the Iowa Soybean Association, told the Des Moines Register.

3. Increased tariffs on Chinese goods raise costs in almost every sector of the U.S. economy, and those increased costs are passed on to American consumers as goods become more expensive.

“Tariffs are paid by American consumers,” former Labor Secretary Robert Reich said in January. “About half of the $200 billion worth of goods Trump has already put tariffs on some almost exclusively from China which means that American consumers are taking a hit.”

American manufacturers also feel an increased strain, given parts they need for U.S.-built goods cost more and, again, those additional costs are passed on to the American consumer.

4. Trade wars are just one component in a complex calculus of tensions between the U.S. and China. There are issues surrounding China’s violation of American sanctions against North Korea, human rights issues involving the detention in internment camps of Uyghurs, a Muslim minority group, and the suspicion Chinese tech companies are involved in intelligence operations against the U.S. government and businesses.

5. The GOP establishment may lose patience with the president’s penchant for tariffs. Republicans usually tout free trade, and to control the White House during a tariff-heavy tenure belies their brand. Furthermore, Republicans from agriculture-dependent states have warned the imposed tariffs are taking a huge toll on business. Some Republicans are even suggesting limiting the president’s tariff powers, while encouraging him to seal a deal with China as soon as possible.

Rep. Will Hurd, a Republican from Texas, asserted that tariffs were "going to be more expensive for Americans to buy products" in an appearance on CNN's "New Day."