(Source: Jiemian News 2024-12-26)
On January 20, 2025, US President-elect Donald Trump will officially start his second term, and imposing additional tariffs is one of his signature policies. Analysts pointed out that Trump's tariff policy is likely to bring new inflationary pressure to the United States, which will severely damage people's consumption power and cause serious damage to the manufacturing industry and supply chain.
Patrick Hallinan, Chief Financial Officer of Stanley Black & Decker, told investors last month that the company was increasing inventory "for many reasons, the most important of which is tariffs." Hallinan said that during Trump's first term, the company was not active in pricing, and will fully learn from its lessons in the next four years and adopt a more proactive pricing strategy, that is, price increases.
During this year’s campaign, Trump threatened to impose a 60% tariff on goods imported from China and a 10-20% tariff on goods imported from other countries. On November 25, he announced on social media that he would sign an executive order on his first day in office to impose a 25% tariff on all products from Mexico and Canada, and an additional 10% tariff on Chinese goods. This is the first time since Trump won the presidential election that he has given specific details on his tariff policy.
Economists generally believe that in the face of increased tariffs, companies have no choice but to pass on the additional costs to consumers, resulting in a sharp increase in the prices of food, clothing, cars and other commodities, which goes against the promise of freeing American families from the troubles of inflation.
According to a recent study by the National Retail Federation, the proposed tariffs will affect multiple consumer categories such as clothing, toys, furniture, appliances, footwear, and travel supplies. If Trump’s new import tariff proposals are implemented, the spending power of the American people will be severely damaged, and annual losses will be as high as $78 billion.
Brian Coulton, chief economist of Fitch Ratings, told Interface News that even if the final tariff rate is lower than Trump currently claims, U.S. import tariffs are likely to be significantly increased in 2025. If Trump's tariff plan is fully implemented, the effective tariff rate in the United States will reach 21%, the highest level since the 1930s. If fully passed on to consumers, it will push up the U.S. Consumer Price Index (CPI) by 3 percentage points. In view of the impact of tariffs and other factors, Fitch has raised its U.S. inflation forecast by the end of 2025 by 0.4 percentage points to 2.8%.
Capital Economics said that assuming Trump introduces tariffs and immigration restrictions through executive action before the middle of next year, inflation is expected to temporarily rebound to around 3% in the next 12 months.
Tariffs will also severely disrupt U.S. manufacturing. CBS reported, for example, that Trump imposed tariffs of up to 25% on imported steel in 2018, which severely damaged steel industry companies such as Ford, General Motors and Caterpillar. In 2021, the Biden administration reached an agreement with EU officials at the G20 Summit to cancel some of the tariffs Trump imposed on steel and aluminum three years ago.
A Peterson Institute for International Economics (PIIE) analysis of current w88 flows and tariff rates shows that if the new administration implements Trump’s promised tariff increases, the machinery, electronics and electrical machinery industries will face the largest import tax burden. These two industries account for a large share of total U.S. imports, currently have low tariff rates, and a significant portion of their products come from China. Imports from these industries include both capital goods and intermediate products as well as final products, which means increased costs that will hurt U.S. supply chains and manufacturers.
Trump’s tariff complex
w88 protectionism is one of Trump’s long-term positions. He calls himself the "Tariff Man" and calls "tariff" the most beautiful word in the dictionary.
In January 2017, Trump took office as President of the United States. Eight months later, he launched an investigation into China based on Section 301 of the w88 Act of 1974, and announced four rounds of 301 tariff lists in 2018-2019. The first two rounds of lists mainly targeted high-tech products, while the latter two rounds of lists broadly covered intermediate goods, capital goods and consumer goods. In addition to China, Trump will also wield the "tariff stick" against the United States' traditional allies. In March 2018, he imposed tariffs of 25% and 10% respectively on steel and aluminum products imported from Europe, citing threats to U.S. national security.
Analysts pointed out that Trump’s two major goals in imposing tariffs are to improve w88 imbalances and promote the reshoring of manufacturing.
Trump is obsessed with reducing the U.S. w88 deficit, viewing it as a symbol of the "plunder" of the U.S. economy, and advocates reversing this situation by raising tariffs and renegotiating w88 agreements. During his presidential campaign in 2016, he repeatedly used the Sino-US w88 deficit as a selling point. In September, he said at a campaign event in Savannah, Georgia, that if he returned to the White House, he would "snap back" manufacturing jobs that have been sent overseas through tax cuts and tariffs.
But overall, analysts believe that Trump’s tariff version 1.0 has not achieved its expected goals.
From the perspective of improving the w88 imbalance, according to research by China Minsheng Bank, although the U.S. w88 deficit with China narrowed from $375.2 billion in 2017 to $279.1 billion in 2023, the overall U.S. w88 deficit expanded from $516.9 billion to $784.9 billion during the same period.
From the perspective of manufacturing, analysts said that although the reshoring of manufacturing has achieved certain results, the effect of additional tariffs is questionable. Studies have shown that the positive impact of increased output in industries protected by tariff policies is offset by rising costs and the negative impact of retaliatory tariffs, resulting in a net reduction in manufacturing jobs.
A joint study by Mohammad Chakor, a professor at the University of Warwick Business w88 casino in the UK, and others found that Trump’s Tariff 1.0 policy not only failed to achieve the expected results, but actually made the United States more dependent on foreign suppliers.
“We found that U.S. manufacturers have actually increased their dependence on a small number of foreign companies. The so-called reshoring of U.S. manufacturing will not work without a mature ecosystem of suppliers, intermediaries, and customers. By the same token, without sufficient support to develop regional supply chains, introducing w88 barriers is unlikely to boost local economies or create jobs,” Chakor said.
Tu Xinquan, Dean of the China WTO Research Institute at the w88 casinotold Jiemian News that during Trump’s first term, the United States has imposed punitive tariffs on 60% of Chinese products. Products without additional tariffs are mostly consumer goods such as household appliances and electronic products. These are products on which the United States is highly dependent on foreign countries. After Trump takes office again, he may first "make up" the tariffs on these products. Furthermore, Trump may further increase import tariffs in industries such as automobiles and chips, which are areas that the United States itself is eager to develop.
For Trump, tariffs are also a bargaining chip. On December 20, Trump issued a threat to the European Union, saying that the latter must purchase U.S. oil and natural gas on a large scale to make up for the U.S.'s "huge w88 deficit" with the EU, otherwise "tariffs will be imposed to the end." At the end of November, Trump stated on social media that he would sign an executive order on his first day in office to impose a 25% tariff on all products from Mexico and Canada.
Tu XinquanI believe that for countries such as Canada and Mexico, Trump’s tariff policy may be used more as a means of pressure in negotiations to ask them to help the United States solve problems such as drugs and immigration.
American consumers will pay for this
Herschel Wilson (Herschel Wilson) is the owner of a pottery shop in Tacoma, Washington. Since Trump was nominated as the Republican presidential candidate in August, Wilson began to stock up on daily necessities for his family of five.
In mid-December, Wilson said in an interview with CNN that he had hoarded $300 of goods since the election and planned to spend an additional $100 a month to stock up on goods because he was worried that he would pay a greater price after Trump fulfilled his threat to impose tariffs.
PIIE stated in the latest research report that although the outside world still knows very little about how the Trump administration will implement new tariffs, “the only thing that is certain is that there are no free tariffs in the world, and new tariffs will cost the United States a high price.”
PIIE pointed out that although the final impact on prices will depend on import demand and supply elasticity, research on the first phase of the Sino-US w88 war found that tariffs were completely passed on to US importers, and then passed on to US consumers, causing additional burdens on US household expenditures, and the burden is even heavier for low-income families.
Research by the American conservative think tank "Tax Foundation" found that Trump's Tariff 1.0 is equivalent to taxing nearly 80 billion US dollars on the entire American people. This is the largest tax increase in decades.
Since the epidemic, inflation has been plaguing the American people. A survey released by Gallup in August showed that Americans considered inflation or high prices to be their biggest financial challenge, marking this result for the third consecutive year.
Under the influence of supply shortages, fiscal stimulus and other factors caused by the epidemic, the U.S. CPI reached a peak of 9.1% year-on-year in June 2022, a new high in more than 40 years. Although inflation has dropped significantly in the past two years, it still has not reached the Fed's 2% target, and the slope of inflation has slowed down significantly in recent months. If Trump implements comprehensive tariffs and plans to expel millions of immigrants, it is likely to reignite inflationary pressure.
Tu XinquanPointed out that during Trump’s first term, U.S. inflation was still low, but during the Biden administration, inflation once reached a 40-year high. "We are now at a critical period. Against this background, Trump's new tariffs will once again push up inflation, and the personal experience of American consumers may be even worse, starting from products that are more closely related to Americans' daily lives."
Japan's Asian Economic Research Institute said that if the United States imposes a 25% tariff on all products from Mexico and Canada and an additional 10% tariff on Chinese goods, it will cause the United States' GDP to fall by 1.1% in 2027, of which mining and agriculture will each fall by 1.5%.
“The high tariff policy proposed by Trump is likely to become a ‘self-destructive behavior’ and may also become a factor that inhibits the overall growth of the world economy.” Shigeru Isono, head of the Asian Economic Research Institute, said in a research report.
Economists at ING estimate that Trump’s sweeping tariff plan could cost each American consumer up to $2,400 per year. Given that consumer spending accounts for as much as 70% of U.S. GDP, potential increases in consumer costs and inflation could have broad negative consequences for the U.S. economy.
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