Personal Finance

How a trade war could affect your pocketbook

Key Points
  • A battle between the U.S. and China over tariffs could mean higher prices for American shoppers this year. 
  • "The net losers in a trade war are always consumers," says the National Retail Federation's David French.
Trade retaliation and retail

As global tensions over trade escalate, expect to take a hit at the register. 

The White House has targeted 1,300 Chinese products for a 25 percent tariff, and China immediately threatened retaliation, sparking fears of a trade war.

The tensions between the world's two largest economies has already spooked investors, and rightfully so. But all Americans have reason to be wary.

"The net losers in a trade war are always consumers," said David French, senior vice president for government relations at the National Retail Federation, an advocacy group.

If the proposed tariffs on Chinese imports are enacted, the result could be increased prices on consumer electronics, including TVs, printers and copy machines, and some household appliances, like dishwashers.

US imports from China of goods subject to proposed tariffs ($ billions, 2017)

Source: Capital Economics. Note: Numbers in brackets are international classification codes.

"There's no way around it: Tariffs are taxes on American consumers," French said.

The federation estimates that access to imported goods through free-trade agreements boosts the purchasing power of the average American family by $18,000 a year. Therefore, tariffs limiting that access will increase the cost of living here in the U.S.

Tariffs are taxes on American consumers.
David French
senior vice president for government relations at the National Retail Federation

When, or if, the tariffs will be imposed following the 90-day public comment period remains to be seen. If the changes go into effect shortly after the comment period closes, consumers could see a price increase on some products as soon as the holiday shopping season, French said.

"These tariffs could end up being the Grinch tariffs," he said.

If those higher prices translate into lower sales, that will mean fewer jobs in the longer run. But there's still a lot to be sorted out, said Mark Hamrick, a senior economic analyst at

And at the same time, analysts believe the economy will hit the Trump administration's 3 percent annual growth target this year, fueled by the $1.5 trillion tax cut package and regulation rollbacks.

"Just as the U.S. economy seemed to have tailwinds for the coming year resulting from the tax cut, a high degree of uncertainty and fear of diminishing benefits of trade and immigration are now headwinds," Hamrick said.

Taken together, it will be a volatile ride.

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