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President Donald Trump and his advisers insist that their trade war with China will not hurt American consumers. But analysts say the opposite.
The tariffs that Trump has already imposed on China would cost the average US household about $ 600 a year, according to a report by JPMorgan Chase. That will reach $ 1,000 if Trump pursues his plan to impose tariffs on an additional $ 300 billion of US imports from China, the bank added.
The estimates show how Trump is playing with fire by expanding the trade war with China to include tariffs on a wide range of consumer goods, including video game consoles, televisions and clothing.
The tariffs will have a "significant" impact on the "US consumer / voter portfolio ahead of the 2020 elections," said JPMorgan strategist for the shares, Dubravko Lakos-Bujas, in a report sent Friday to the bank's clients.
He added that tariffs on China would eliminate most of the benefits that households have derived from Republican tax cuts.
Why your Christmas shopping early? The rates
JPMorgan's view, based on studies by the New York Federal Reserve and academics, is very different from what the Trump administration says. "Consumers have not been hurt," Peter Navarro, a White House advisor, told CNN's Jake Tapper on Sunday. "China bears all the burden."
The trade war casts a shadow on the economy
The fierce battle between the world's two largest economies is likely to lead to a serious slowdown or even a recession. This risk has caused turbulence on the stock market and pushed nervous investors to invest their money in bonds.
The market relief caused by Trump's delay on some tariffs in China could be brief
"The strongest economies can become vulnerable to recession as a result of protectionist policies and trade wars," said Kristina Hooper, chief global market strategist at Invesco, in a note to his clients on Monday.
Hooper noted that the US economy was experiencing rapid growth and a very low unemployment rate in 1929 before the Smoot-Hawley Tariff Act came into effect.
In the US company, many agree with the Trump government's goal of getting China to play its fair game in trade, especially with respect to non-trade barriers, such as transfers. forced of technology. However, the use of tariffs as a bargaining tool is causing more and more concern.
Commercial warfare rates could drive up costs for iPhones and consumer electronics
The first two sets of tariffs on China focused on spare parts and other intermediate goods. However, the impact on households remains significant, as these rates were 25%, said Kamal Tamboli of JPMorgan to CNN Business.
Trump intensified the trade war with China this month by promising to impose a 10% tariff on US imports of $ 300 billion from China on Sept. 1. This third rate cycle includes a large basket of consumer goods.
"Your average Joe will finally see the price rise," Tamboli said. "If you consider the tax reform as a fiscal stimulus, it is in any case the opposite."
Some delayed rates
Last week, as fears of recession increased, the Trump administration postponed December 15 tariffs on consumer goods such as smartphones, toys and video game consoles. CNN.
However, some goods from China should still be subject to a 10% tariff on September 1st. This includes food products such as peanuts, meat and cheese, a significant amount of footwear imported from China, clothing such as gloves and scarves, and consumer products such as smart speakers, printers and televisions. .
"There is no easy way to compensate consumers," wrote Lakos-Bujas.
He added that the high impact of the latest series of tariffs on US households meant that there was "a good chance" that the Trump administration would end up completely removing taxes.
Companies warn that more tariffs on Chinese products will hurt the US economy
It is extremely important that the trade war avoid infecting consumer spending, which accounts for the bulk of the US economy.
Stimulated by a historically low unemployment rate, households continued to spend. Retail sales surged in July more than expected by analysts. However, consumer confidence dropped sharply in early August to reach its lowest level in seven months, as the trade war intensified and the Federal Reserve lowered interest rates to compensate for the losses. tariff uncertainties.
Home Depot, Kohl support for rates
Corporate profits are already under pressure from the trade war.
JPMorgan lowered its estimate of S & P 500 profits in 2020 to reflect September 1 tariffs. He warned that profits would worsen if tariffs set for December 15 were applied.
Home Depot lowered its sales forecast Tuesday in part because of a potential weakness in demand caused by tariffs on China.
"The American consumer is facing the impact of tariffs. While trade talks are fluid, consumer demand could suffer, "said Carol Tome, chief financial officer of Home Depot.
Kohl's works with suppliers to prepare for the impact of rates.
"Everyone has been very well prepared to face this problem," Kohl CEO Michelle Gass said Tuesday.
She left the door open for price increases, saying that Kohl "will make very wise and surgical decisions as these issues come up."
Small businesses at risk
Large firms are more likely to absorb tariffs because they have more weight to raise prices, stronger balance sheets and more diversified supply chains.
JPMorgan warned, however, that tariffs could be a "big hurdle" for small businesses because they are less able to pass on costs to customers and suppliers. The company noted that small businesses make up almost half of the US economy and workforce.
"The unintended fallout of tariffs on the economy" and on corporate profits, Lakos-Bujas said, "could be much more serious" if small businesses were forced to cut jobs to face tariffs.
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