Trump's fight with China could cause have major economic consequences — here's what tariffs are, and how they could affect you

pulse

March 5, 2018 4:08 PM

President Donald Trump's new tariff on China cause the price of everything to go up.

President Donald Trump announced that the US plans to impose tariffs on imports from China.
China responded with tariffs on US imports to China.
Tariffs are taxes on imports designed to boost US production of goods.
The new tariff will cause costs to go up for businesses that use Chinese goods — and possibly jump prices for consumer goods, too.

President Donald Trump and the US Trade Representative rolled out a list of goods from China that will subject to new tariffs, a move that will have consequences for a wide swath of American consumers and businesses.

The measures are designed to protect US businesses from Chinese intellectual property theft. But they could also have serious consequences for businesses that use the goods from China — as well as consumers that buy those goods.

China also responded with tariffs of its own, targeting US cars and soybeans, which could exacerbate these problems.

What is a tariff?

Hans Mikkelsen, a Bank of America Merrill Lynch strategist, said the new taxes will shift the supply and demand for the various goods they are imposed on.

"International Trade 101 analyses the partial equilibrium effects of a tariff as driving a wedge between demand and supply curves, whereby the price goes up and the quantity down," he said in a note to clients.

What does it mean for businesses?

add on an additional $347.7 million
in costs for American brewers.

Additionally, the higher costs could cause businesses to find other areas where they can save money, including paying workers. Studies found that the most recent steel tariff imposed by President George W. Bush in 2002 resulted in as many as 200,000 jobs lost in industries that use steel to make their products.

What does it mean for the average American?

Commerce Secretary Wilbur Ross said in a CNBC appearance that the increased cost for a car would amount to about $175, which he called "no big deal." On an aggregate scale, however, the increase adds up.

Over 17.2 million cars were sold in 2017, meaning that if Ross's math is right, Americans would pay about $3 billion more for vehicles under the new tariffs amid similar purchasing patterns.

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