Tariffs could cost American households $2,400 each in 2019, a new study warns

  • Tariffs stemming from President Trump's trade conflicts could cost Americans $915 each, or $2,400 per household, in the form of higher prices, lower wages and lower investment returns in 2019, according to a new study.
  • If the tariffs stay in place, the study says, the losses would add up to $17,300 per household by 2030.
  • The study, commissioned by the lobbying shop for Koch Industries and conducted by consulting firm ImpactECON, looked at the potential cumulative impact of tariffs.
  • The conservative Koch political network has argued against the Trump administration's protectionist trade policies.
Harley-Davidson motorcycle engines are assembled at the company's Powertrain Operations plant on June 1, 2018 in Menomonee Falls, Wisconsin. 
Getty Images
Harley-Davidson motorcycle engines are assembled at the company's Powertrain Operations plant on June 1, 2018 in Menomonee Falls, Wisconsin. 

Tariffs stemming from President Donald Trump's trade conflicts could cost Americans $915 each, or $2,400 per household, in the form of higher prices, lower wages and lower investment returns in 2019, according to a new study.

If the tariffs stay in place, the study says, the losses would add up to $17,300 per household by 2030.

The study, commissioned by the lobbying shop for Koch Industries and conducted by consulting firm ImpactECON, looked at the potential cumulative impact of tariffs. The conservative Koch political network has argued against the Trump administration's protectionist trade policies.

The new study comes as Trump prepares to meet with Chinese President Xi Jinping at this week's G-20 meeting, amid the U.S.-China trade standoff. The Koch-commissioned study assumes that the administration's steel and aluminum tariffs and quotas remain, as well as retaliatory tariffs U.S. trade partners have put in place.

It also assumes a 25 percent tariff on all imports from China and retaliation. It factors in a 25 percent tariff on all imports of autos and auto parts and retaliation, exempting Canada and Mexico since they have negotiated that in the new U.S.-Mexico-Canada trade agreement to replace NAFTA.

"Any trade debate should convey a clear understanding of the effect of the U.S.' and its trading partners' actions on consumers, businesses and supply chains," said Philip Ellender, Koch Industries president of government and public affairs. "At Koch, we support free and open exchange as a means to help people improve their lives. To that end, this report should serve as a unique and useful resource for policymakers as they consider the consequences of trade actions for all parties involved."

The study predicts steep long-term job losses. While strong economic growth in the U.S. initially will protect workers from job losses, the tariffs will lead to the loss of 2.75 million American jobs, the study predicts. Low-skilled workers in agricultural and manufacturing jobs would be hit the hardest under this scenario. In addition, the study figures an additional 700,000 workers will lose jobs but be able to find work in other industries.

Meanwhile, the study expects the tariffs to sap $365 billion from U.S. GDP next year. Overall, it expects GDP losses to total $2.8 trillion from 2019 to 2030.

Source: ImpactECON, Koch Companies commissioned study

The U.S. and China would be hurt most by the tariffs. Based on a version of the Global Trade Analysis Project model and database, which includes trade data for 140 countries and 60 economic sectors, the study finds that trade would fall across almost every commodity as the U.S. and China raise tariffs.

While the U.S. decreases its imports from China, the rest of the world buys more Chinese goods. The EU, Japan and Korea all increase their imports from countries other than the U.S., Canada and Mexico. Trade between Argentina and Brazil also rises, and their exports to most countries, especially China, increase. Russia also boosts its exports.

Businesses are feeling the pinch. Since tariffs against China went into effect on July 6, the tech industry has paid $349 million more on imported goods from China compared with a year ago, according to Consumer Technology Association data compiled and analyzed by the Trade Partnership. That's a 195 percent cost increase.

The tariffs even threaten to hurt some of the industries they aim to help. For instance, Constellium Rolled Products in Ravenswood, West Virginia — which designs and manufactures aluminum products mostly for the aerospace, automotive, packaging and defense markets — is feeling the pinch.

"The Section 232 tariffs, which imposes a 10 percent tariff on virtually all aluminum and aluminum product entering the United States — not just from China but from all countries — is the wrong solution to a real problem," Constellium CEO Buddy Stemple is expected to tell lawmakers and staff on Capitol Hill on Tuesday, in an industry-backed briefing. "While well-intentioned, the tariffs are making the U.S. aluminum industry, including Ravenswood, less competitive on the world stage."

The problem is that the U.S. aluminum industry doesn't produce enough product domestically to support demand, sending prices higher.

"Even if we brought all of our U.S.-based smelters back on line tomorrow, we would not have nearly enough primary aluminum capacity to satisfy the growing domestic demand," Stemple's prepared remarks say.

The scenario mapped out by the ImpactECON study is pessimistic, and for that reason some economists predict it won't come to fruition. As Trump and Xi plan to meet on the sidelines of the G-20 meeting in Argentina, there is hope that the two will work out an agreement that de-escalates the trade tensions and puts a hold on future tariffs, especially the increase from 10 percent to 25 percent on $200 billion worth of Chinese imports slated to go into effect beginning next year.

"The positive scenario would be some kind of an agreement in principle and then the negotiators follow up within the next few months, and I think a key issue is, does the U.S. refrain from escalating the tariffs on Jan. 1," said David Dollar, a senior fellow at the Brookings Institution who is a former U.S. Treasury emissary to Beijing.

But Trump threw cold water on that idea on Monday, telling The Wall Street Journal that if negotiations don't work out, he would escalate tariffs in January and slap duties on the rest of Chinese imports, either at a 10 percent or 25 percent rate.

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