Anti-China tariffs can cost every US family $850

A tariff is as tax on consumers

There should be no confusion as to what the result of these tariffs will be and to whom the $850 lost to American households by US tariffs against China would be paid. A tariff is simply a tax. It is not paid by the producers - they generally receive the same price for their product to which the tariff is added. The higher price after the tariff is paid by the consumer with the revenue from the tariff being paid to the government. In other words, the threat of tariffs against China are a threat of an $850 a year tax on every American household.

President Trump says he is in favour of low taxes but with tariffs against China he is in fact putting a tax on purchases which US families will pay.

That is why every US household faces that simple choice. Think what it could do with $850? It could buy a new smartphone, it could take a weekend away, it could buy new furniture or electrical goods. Or it could give $850 to the tax collector. It doesn't seem a very difficult choice?

US wages and prices

The situation is worse because US prices are already rising. The latest available US figure for the rise in "core inflation", for July, that is for consumer prices rises excluding food and fuel costs, was 2.4% - the highest for 10 years. More seriously still total consumer price inflation, which is what US families actually pay, rose by 2.9% in the same month. But US hourly wages in the same month only rose by 2.7%. Therefore, due to price rises, US real inflation adjusted wages were falling.

Indeed, this is the 3rd month in a row in which US real wages have fallen due to inflation –as shown in Figure 1. In that situation the last thing that US families need is tariffs creating still higher prices.