Consumers, already stung by rising prices, could get socked by Trump’s tariffs
Wendy Howard is worried.
A steady uptick in prices and in her cost of living already led the Chicago native to abandon retirement to reboot her teaching career. She doesn’t eat out anymore and is concerned that her holiday shopping could be curtailed if the Trump administration’s trade war with China pushes prices even higher.
“My rent increased astronomically, gas prices, everything,” said Howard, who is in her 50s and lives in Pasadena, California. “I’m a retired teacher, I’m going to have to take another teaching job … so that I can have hopes of retiring one day.”
Howard’s worries are legitimate, although not immediate, economists say.
Prices for everything from housing to car insurance to eating out are on the rise. What’s more, economists predict consumer prices will climb higher if the Trump administration’s efforts to impose steep tariffs on a wide range of imported goods succeed. During an interview with CNBC that was broadcast Friday, President Donald Trump suggested he’d be willing to assess tariffs on virtually every product imported from China.
“If the price of your auto parts goes up, it will eventually get passed on to consumers, but the question is, how quickly?” said Philip Levy, a senior fellow at the Chicago Council on Global Affairs and adjunct professor at Northwestern University’s Kellogg School of Management.
Chicago-area prices rose 2.2 percent in 12 months that ended in June, and have been rising steadily since early 2017. Among the biggest gainers over the 12-month period were food away from home, up 3.6 percent; alcoholic beverages, up 3.9 percent; and gasoline, up 26.8 percent.
Nationally, consumer prices rose 2.9 percent in the 12 months that ended in June, the largest increase in more than six years.
Working: Also increasing is the number of hours workers are putting in each week, according to Katheryn Russ, an economist at the University of California at Davis and former senior economist at the Council of Economic Advisers during the Obama administration. So if workers are taking home more money, Russ said, it’s because they are working more hours.
But inflation is chipping away at those wage gains.
Experts warn consumers not to overextend themselves financially. “I wouldn’t do any purchasing I wasn’t planning to,” said Diane Swonk, chief economist at Grant Thornton.
Some consumers already are getting squeezed. A 20 percent tariff on imported Canadian lumber, implemented last year, has upped the cost of new single-family homes by $9,000, according to the National Association of Home Builders.
Tariffs of 20 to 50 percent on washing machines from China, South Korea and Mexico have increased the price of foreign-made washers by $50 to $90, retailers say.
Also trickling down to consumers is a 10 percent tariff on imported aluminum and 25 percent tariff on imported steel, Russ said. The price of U.S.-made kegs for beer is up, as is that of canned sodas and food. The uptick is small, about 1 cent per can, but those small increases add up.
“There are a lot of ways these tariffs could hit us on lots of products we buy everyday,” Russ said.
The administration seeks to impose a 10 percent tariff on another $200 billion of Chinese imports, meaning consumers could be stuck with higher prices on items they shop for every day – from hats to kids’ bicycles to some televisions. Those tariffs could take effect sometime after Aug. 30.
Household spending: Russ estimated the tariffs already in place could raise American household spending by $24 to $147 a year, depending on where households fall on the income range. Alongside future rising prices, these costs could put a dent in last year’s tax cut, according to Russ.
“That’s how sneaky these tariffs are, they show up in silent but important ways,” she said.
Despite warning against overspending, economists say the price tags on new cars are likely to climb in the near term, so it may be worth taking the plunge on an imported vehicle sooner rather than later. Trump has proposed a 25 percent tariff on foreign-built vehicles, a move that the Alliance of Automobile Manufacturers said will raise the price of an import by almost $6,000 and a U.S.-built one made in the U.S. by $2,000.
If the trade battle continues, it could turn the economy upside down and push the nation into a recession next year, Swonk said. But right now, there’s some breathing room.
“There’s a lot of scrambling of people (in the business community) trying to figure out how to manage this,” said R. Kevin Williams, a trade lawyer at Clark Hill.
Among those are soybean farmers, particularly in soybean-rich Illinois. China imposed a 25 percent tariff on U.S. soybean exports earlier this month. “If the price of soybeans goes down, farmers will have less to spend on new equipment. And equipment makers such as Caterpillar and John Deere will (eventually) have to raise the price of equipment due to steel tariffs,” Williams said. “Eventually it will have an impact on the economy.”
For now, Shonniece Hatcher is going to keep shopping. The 22-year-old Hyde Park resident has been eyeing a pair of red-soled black Christian Louboutin stiletto heels for several years. Now that the recent college graduate has a research job downtown, she said she’s ready to finally take the plunge and buy them. “For now, my shopping habits won’t change,” she said.