The 25% tariff that the United States imposed on July 16 on $34 billion of imports from China (with $16 billion more to come, likely in August) touches nearly every corner of American consumers' lives. Why? Because it's effectively a tax that represents a cost to U.S. producers, wholesalers and retailers. Sooner or later, it gets passed on to consumers in the form of higher sticker prices for everything from an X-ray to a new car. The only real question is how quickly it happens.
Companies that import their products have limited choices: absorb the extra cost of the tariff, increase selling prices immediately, shift production to other countries or do some combination of the three.
Initially, expect a relatively limited impact on consumers because companies will hold the line on prices while they monitor what action competitors take. Plus, the Trump administration excluded some higher-volume goods when it was drawing up lists of Chinese products to target with tariffs. For example, it left off some high-profile consumer goods such as flat-screen TVs, so they shouldn't go up in price.
Don't expect the pain of higher prices to be over quickly. There's another round of tariffs -- 10% this time -- coming on thousands more imported items from China. They won't take effect for another two months. But when they do, they'll affect a huge range of goods that consumers and retailers buy and use on a near-daily basis, from automobile tires, spark plugs and windshield wipers to handbags, batteries and furniture. So brace for successive rounds of price rises on a steadily growing range of imported goods, for much of the rest of the year.
Here are eight product categories that soon may put a bigger dent in your budget:
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Anything made with steel and aluminum will cost more because of the 25% tariff on imported steel and the 10% tariff on aluminum.
Relatively few cars are imported from China, but General Motors does import the Buick Envision crossover from there. GM will likely raise the consumer price but isn't yet saying by how much.
It will cost more to keep your car in top shape. A tariff of 10% is being added to Chinese-made parts, so expect to see auto parts stores impose an increase of about 10% for a new battery or spark plugs. Automobile dealers will pay more, too, so they'll pass that on to car owners and tack some extra on top of it.
The most significant impact on car prices will occur if President Trump follows through on threats to impose 20%-25% tariffs on European Union-made vehicles because of the EU's 10% tariff on American-made cars. A U.S. tariff would likely cause prices for imported brands such as Mercedes-Benz to go up by about $5,800, according to industry estimates.
Ford Motor Co. now substitutes greater amounts of aluminum for steel in its best-selling F-150 pickup, aiming for less weight and increased rust resistance, but don't expect its sticker price to soar. Like all the automakers, Ford likely has aluminum stockpiled and prices negotiated well into the future. The longer a trade war lasts, though, the more inevitable it is that a price increase will show up on dealers' lots.
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Copyright 2018 The Kiplinger Washington Editors