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These products are probably more expensive because of Trump’s trade war

Dan Kopf
A football players wearing headphones.

Every month, the US government collects the prices of products and services sold across cities in the United States. The rise and fall of these prices is how the government calculates inflation, the statistic that economists use to understand how much more or less a dollar buys now versus the past. It is also a good way to gauge the impact of the Trump administration’s protectionist trade policy.

Over the past several decades, inflation data (as measured by what’s known as the Consumer Price Index) has shown that healthcare, education, and childcare got a lot more expensive while the price of electronics, furniture, and cars either fell or stayed about the same. Automation and outsourcing have made physical products better and cheaper, but have not done the same for services.

For example, in the year to July 2019 the price of the typical TV fell by about 20%, even though the average price for all goods and services rose by 1.8% during that period. At the same time, medical care prices grew by 3.3%, on average.

That tremendous fall in TV prices is a reflection of the fact that when calculating inflation the government attempts to control for quality, so it compares the prices of TVs with the same features. Fortunately for Americans, you can get the same model TV a lot cheaper today than you could have last year. Incredibly, inflation data suggests Americans can now buy the equivalent of the typical TV sold in 1999 for about 4% of what it cost back then.

For some physical products, though, prices in the past year have bucked this trend, and the Trump administration’s trade war with China is the most likely culprit.

Since 2009, the price of audio equipment in the US has been plummeting. Advances in manufacturing and supply chain management mean that $100 spent on speakers goes almost twice as far as it did 10 years ago. But since the start of 2018, prices for audio equipment stopped falling. Although it could be a result of many factors, the most likely is US trade policy. More than half of US imports of audio equipment come from China, and these products were hit with a 10% tariff in September 2018, raised to 25% in May 2019. The audio industry has said the tariffs forced them to lift prices. Whatever improvements manufacturers are making in quality have not kept up with the price increase, resulting in inflation as measured by government statistics.

Audio equipment is not the only product that saw a change in trend since the outbreak of trade tensions. Quartz examined Consumer Price Index data to identify which physical products saw the largest increase in inflation compared to the annual average of the past three years (from July to July of each year). The list comprises products like furniture, clothes, and electronics, which have all been affected by tariffs. For example, prices for personal computers had been falling at a rate of more than 5% in the previous three years, but only fell by 1% in the past 12 months. (We excluded commodities like food and oil from this analysis, because they tend to fluctuate based on environmental or supply shocks.)

These products have seen an unusual amount of inflation over the past year

Product Price change past year Avg. price change previous three years Difference
Audio equipment -0.5% -8.8% 8.4 pct pts
Infant and outdoor furniture 4.3 -3.6 7.9
Women’s outerwear 6.7 -1.0 7.7
Men’s suits, sport coats, and outerwear 3.6 -2.6 6.2
Photographic equipment and supplies 3.8 -1.9 5.7
Furniture and bedding 3.9 -1.2 5.0
Sewing machines, fabric, and supplies 5.1 0.2 4.9
Photographic equipment 3.4 -1.2 4.6
Video equipment 1.1 -3.4 4.5
Personal computers -1.2 -5.6 4.4

Earlier this month, the Trump administration said that a 10% tariff would be imposed on $300 billion in Chinese imports in September. This week, it was announced that some of the products, including some included in our analysis (like certain categories of audio and video equipment), would be delayed until December—a “Christmas present to the nation” according to Peter Navarro, a key Trump trade advisor.

The tariffs are intended to exert pressure on China in trade negotiations. It is difficult to know whether this is working as intended, but it is certainly causing American consumers pain. Yet the inflation data suggests it is possible that many consumers may not notice the effect because it impacts products that for years have been falling in price, improving in quality, or both.

 

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