The president has made good on his promise to come down hard on the country’s trading partners by slapping hefty tariffs on a long list of imported goods. Some of these tariffs were passed earlier this year, some went into effect as recently as last month, and others are expected to take effect in the near future.
As a tax-paying citizen, who likely purchases more foreign-made goods than you realize, you owe it to yourself to learn how these new tariffs will impact your wallet. And we’re here to help you do just that!
What are tariffs?
First, let’s explore the general concept of tariffs and review those that recently went into effect.
A tariff is a tax on imported goods. The individual consumer or American company purchasing the imported product is responsible for paying the tax associated with it. The ultimate purpose of a tariff is to give an edge to U.S.-manufactured goods by raising the prices of their foreign-crafted counterparts.
Tariffs have long-lasting effects on the economy that fall beyond their intended purpose. When a company must pay more for its materials, it will likely pass this extra expense onto its own consumers. Alternatively, they may choose to cut costs by hiring fewer workers and giving fewer raises to employees. Some companies will even move part of their production overseas.
The first of the recent wave of tariffs, targeting washing machines and solar panels, went into effect earlier this year. The second set of taxes of 25% on imported steel and 10% on imported aluminum followed. Another wave of tariffs will go into effect later this month, focusing on hundreds of Chinese industrial goods. More are still planned, including taxes on Chinese-made TVs and cellphones.
Let’s take a look at how these tariffs impacted various industries and what it all means for the American consumer.
1.) Washing machines
The first move in the trade war taxed imported washing machines by 20-50%. The tariff was passed in an effort to stop Whirlpool from losing out to Korean-based Samsung and LG, who were grossly undercutting Whirlpool’s prices. While the move initially boosted the American company’s stock and employee base, the more recent tariff on steel will push up Whirlpool’s costs and likely offset any previous gains.
What this means for you: The price of washing machines has jumped by 17% in the last three months. Once the steel tariff hits the industry, those prices are likely to increase again.
2.) Solar panels
Imported solar panels were hit with a 30% tariff in January 2018. However, there are plans for this tax to gradually decrease over the next few years. Like the tariff on washing machines, this tax was imposed because American manufacturers were losing out to offshore companies that were undercutting prices.
An incredible 80% of all solar panels in the U.S. are imported from overseas. For businesses that manufacture solar panels, this tariff is great news for their bottom line. However, the result for the many companies in the business of installing, marketing, and distributing those panels could be a near-fatal blow.
What this means for you: The average price for solar panels is expected to increase by 40% over the next year.
The purpose of the 10% tax on imported aluminum is to help American manufacturers of this heavily used raw material. As a result, though, the many American companies that use aluminum for the production of their own goods will pay more for this essential metal. They will then pass this extra expense onto their customers.
While the administration is hopeful that the tariff will force the country to produce more aluminum, there’s no way for America to manufacture enough of this raw material to meet the country’s needs.
What this means for you: Your favorite drinks will likely see a price increase. Lots of beverage companies, like Coca-Cola and Budweiser, rely on cheap and imported aluminum to keep their costs down. In addition, you might see a price hike in lots of canned food products.
Steel now has a hefty 30% tariff. Like the aluminum tariff, the hope is that the U.S. will increase its steel production, thus creating more jobs. But, in another echo of the aluminum tariff, the U.S. doesn’t have the capacity to produce enough steel to meet its needs. It is also likely that the negative effect the tariff will have on other industries will more than counterbalance any gains.
What this means for you: The steel tariff has the largest impact of all; a huge scope of goods use steel in their production.
The steel tariff will affect the following industries:
- Cars. The American auto industry produced 11 million cars last year. With close to 2,000 pounds of steel used in the production of each car, the tariff will hit the auto industry hard. Naturally, car prices will rise dramatically.
- Construction. Steel is used heavily in construction and renovations. Expect to see an increase across the entire construction industry.
- Airline travel. Steel is a major part of every airplane. Expect to see flight costs rising thanks to more expensive steel.
- Appliances. All major household appliances, like refrigerators and washing machines, are created from steel – and they’re all about to get more expensive.
There’s not much you can do about the upcoming price hikes, but now that you know what to expect, you won’t be in for much of an unpleasant surprise when you purchase products manufactured overseas or crafted using imported materials.
Your Turn: Do you think the tariffs will ultimately benefit the U.S.? Share your take on the trade war in the comments.
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