It’s tempting to believe President Trump’s insistence that Chinese companies will bear the costs of US tariffs, but as a chorus of emergent trade experts have pointed out, this simply isn’t true.
American consumers will bear at least some of the costs of the new tariffs, though the extent will depend on how companies react to the new taxes (that is, whether they will pass it on to consumers, tolerate the gross margin hit, or decide to rejigger their supply chains).
But as analysts scramble for a ‘ballpark’ figure representing how much this latest round of tariff escalation (going to 25% from 10% on $200 billion in Chinese goods) will cost the average American household, a team of researchers working with the Federal Reserve Bank of New York have an answer of their own: $831.
That figure stems from an update of methodologies the team devised last year. Their calculations are based on two categories: taxes and ‘dead weight’ costs.
A ‘dead weight’ cost is incurred when tariffs push a company to find a new, less efficient source for a given product. For example: If a given Chinese import is hit with a 10% tariff, a company can either choose to pay the additional $10 per $100 in taxes, or it can find another producer of the same product that isn’t subject to tariffs. Say, for example, the company switches to importing the products from a Vietnamese factory where, because the factory isn’t as efficient, the