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US-China Trade War: America to Expect Inflation Caused by Raised Tariffs

  • Augustine Ojeh
  • May 22, 2019
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US China trade war threatens inflation

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The US-China trade war is rubbing off on the businesses and citizens of both countries involved as Americans are beginning to worry about how the trade war could affect them. BBC World Service economics correspondent, Andrew Walker compiled series of questions that are being asked by Americans regarding the effect of the trade war on inflation, and he responded on his post saying, “The tariffs can affect prices inside the US in several ways. They can add to the cost of imported goods if the tariffs are passed on by exporters. That can increase the prices of goods bought directly by consumers.”

“Adding a 25% tax increase on top of these tariffs would mean some working American families could pay a nearly 100% duty on their shoes,” US Shoe companies protest.

In concern of the working class population of the United States, 173 companies have signed a letter stating that President Trump’s move on raising import tariffs is a red flag for their businesses; reporters from BBC recorded on Wednesday morning. These companies, which include shoes and sportswear giants, Nike and Adidas, have lamented over the threat which these government-imposed levies and tariffs are posing to the future of most businesses.

This United States economy has been one of the most stable economies in the world for time memorial, but citizens are scared of the possibilities of the occurrence of a recession. Economists are concerned about these possibilities, and they have been confident that the country is under no significant threat of a recession-causing circumstances that may emanate from the trade war. Neil Irwin, a senior economics correspondent for The Upshot, had responded to this when he wrote in the New York Times in August last year that “exports are only about 8 percent of total G.D.P. in a $20 trillion United States economy. The direct economic cost of the American tariffs on imports and retaliatory actions by other countries announced so far should be half a percent of total G.D.P. or less, hardly enough to raise recession alarm bells.”

Although when Irwin made that comment, the tariff rates were considerably lower, it is believed that the economy can stand the pressure of the trade war. President Trump went reportedly posted on his Twitter handle on Tuesday last week acknowledging that the country holds a stronger position in the situation since China sells over $500 billion worth of products in the US and the US sells significantly less.

How the Tariffs Could Cause Inflation

Many US companies amongst which are the 173 earlier stated companies sell products imported from China. These high tariffs are passed on by exporters forcing these companies to increase the prices of their products and a consequent hike in the price of most of these imported products. Also, US companies that use imported raw materials from China will be forced to raise their prices to make up for the cost of importation, BBC reports.

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