As President-elect Donald Trump prepares to return to the Oval Office, U.S. retailers dependent on foreign suppliers are poised to pass on the cost of his proposed import duties to consumers, which can lead to higher prices for a range of products.
Americans will lose between $46 billion and $78 billion in purchasing power each year on products including clothing, toys, furniture, appliances, shoes and travel goods because of the new tariffs, the National Retail Federation said in bargain was released on Monday.
“Retailers rely heavily on imported products and manufacturing components to offer their customers a variety of products at affordable prices,” NRF Vice President of Supply Chain and Customs Policy Jonathan Gold said in a statement. “A tariff is a tax paid by the U.S. importer, not a foreign country or the exporter. This tax ultimately comes out of consumers’ pockets through higher prices.”
For example, a $40 toaster oven would sell for $48 to $52 after taxes, while a $50 pair of running shoes would jump to $59 to $64, according to the industry trade group. A $2,000 mattress and box spring set would cost $2,128 to $2,190, the NRF said.
During President-elect Trump’s first term, his administration imposed tariffs of up to 25% on more than $360 billion in products from China. President Joe Biden’s White House kept most of those tariffs and added more on goods including Chinese electric cars and microchips.
Now Trump has said he plans to impose a 60% tax on goods from China and a 10% to 20% tariff on all of the $3 trillion in foreign goods the US imports annually.
Such sweeping tariffs would revive inflation because they would be paid mostly by American consumers, Treasury Secretary Janet Yellen has warned, giving a public opinion. divided by other economists on both sides of the political aisle.
“A consistent theoretical and empirical finding in economics is that domestic consumers and domestic firms bear the burden of a tariff, not the foreign country,” the nonpartisan Budget Lab at Yale University said in a analysis was published in mid-October.
Trump has repeatedly claimed that foreign companies would foot the bill, telling a gathering last month at the Economic Club of Chicago that “countries will pay” the tariffs. In reality, US importers pay the duties to the US Customs and Border Protection Agency when their goods cross the border.
“These policy steps would amount to regressive tax cuts, which are only partially paid for by regressive tax increases,” and cost a typical middle-income household about $1,700 in increased taxes per year.” according to economists at the Peterson Institute for International Economics. The proposed tariffs would shift the tax burden from the well-off to lower-income Americans, the nonprofit also said in a policy short was published in August.
Harvard University professor and former US Treasury Secretary Lawrence Summers questioned the wisdom of taxing imports, noting the potential impact on prices. “For parents, we are approaching the holiday season and most of our toys are imported from China,” Summers tweeted on Thanksgiving Day.
Trump has argued that tariffs force American companies to manufacture goods on American soil rather than buy from foreign suppliers.
But some companies have other plans.
“If we get tariffs, we will pass those tariff costs back to the consumer,” Philip Daniele, CEO of auto parts supplier AutoZone, told Wall Street analysts in an earnings call at the end of September. “We will generally raise prices before — we know what the tariffs will be — we will generally raise prices before that,” Daniele said.
Major suppliers to AutoZone include companies based in China, India and Germany, according to the company.
Stanley Black & Decker CEO Donald Allan Jr. said last week, his tool-making company has been planning for the possibility of additional import tariffs since last spring. “Obviously, coming out of the gate, there would be price increases associated with tariffs that we (would) put into the market.”
Allan downplayed the idea of moving manufacturing back to the US, saying it would not be cost-effective. The company’s options could include “moving production and aspects of the supply chain to different parts of the world,” including from China to other parts of Asia and possibly Mexico, the executive said.
Such a shift has already been made by Shelton, Conn.-based Acme United, which now has its Westcott brands such as rulers made in Thailand and the Philippines, avoiding the tariffs aimed at China, CEO Walter Johnsen said in an earnings call in October.
Acme has shifted production of some medical products to factories in India, Egypt and the United States in Florida, North Carolina and Washington, the manager said.
Companies also stocked up and placed larger-than-usual import orders before new tariffs take effect, as the U.S. imported 11% more Chinese goods in July and August than it did in the same two-month period a year ago, according to to census bureau.
