The trade taxes Trump has levied on Chinese goods are already costing American families $600 a year, and that total is set to jump to $1,000 when Trump’s next round of tariffs kick in, starting in September and continuing in December.
This trade-tax estimate from JPMorgan, circulated in a note to investors this week, provides one of the first hard estimates of the bite to American wallets from the Trump tariffs. These trade taxes are paid by American importers — and passed on to the rest of us. Economists at Princeton, Columbia, and the Federal Reserve Bank of New York recently published a paper concluding that “the full incidence of the tariff falls on domestic consumers.”
The president routinely lies about this inconvenient truth, however, gaslighting the public: “Don’t let anyone tell you that we’re paying,” Trump insisted in July. “We’re not paying. China’s paying for it.”
The JP Morgan note, quoted widely in the financial press, underscores that Trump’s latest round of trade taxes — 10 percent on $300 billion in Chinese imports — largely falls on direct-to-consumer goods, instead of agricultural products or other raw materials. This means the impact for consumers will feel a sting that’s hard to ameliorate.
Trump has softened the blow to farmers, whose exports have been hit with retaliatory tariffs by U.S. trading partners, with payments to offset trade losses. But Dubravko Lakos-Bujas, the JPMorgan analyst responsible for the estimate, notes that there is “there is no simple way to compensate [the] consumer.”
Despite lying that these taxes are paid by the Chinese, Trump has postponed some tariffs on consumer goods to avoid taxing Christmas. According to federal trade representatives, the taxes on “cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing” will be postponed until December 15th.
For most American families struggling to make ends meet, $1,000 a year is a huge hit. And cumulatively, these taxes will create a significant drag on the economy. The effect is as if every family in America were to forego the purchase of a new high end iPhone. According to the JPMorgan note, Trump’s trade taxes on the middle class will nearly cancel out the dividend from Trump’s 2017 tax cut.
The bite for consumers from Trump’s trade taxes is being felt just as the global economy has hit choppy waters — a slowdown precipitated in significant part by the trade war itself. Rather than re-assessing the cost-benefit of so much “winning big on trade,” Trump and his economic team are reportedly casting about for a new round of stimulus.
These measures including the prospect of a new payroll tax “holiday” — temporarily reducing contributions to Social Security and Medicare to put more cash in consumer pockets. Because the nation is already running near-record deficits, this tax cut would be financed through new debt, largely payable to a large Asian nation with which we’re currently engaged in a trade war.
Trump’s tariff bungle is creating a rift between the president and the business community. The U.S. Chamber of Commerce — long a stalwart backer of the GOP — is losing patience: “American businesses and consumers are bearing the brunt of the global trade war,” the Chamber writes in a statement on its website. “By now, it’s plain to see that tariffs are inflicting harm on the American economy and will continue to do so unless the administration changes course.”