Applying tariffs

Weekly Updates

Investors have been waiting for inflationary signs from US trade. Federal Reserve Chair Powell seems to have personally seen price increases already, informing President Trump that trade taxes were one reason for the Fed’s rising building costs. US buyers of consumer appliances—washing machines, dishwashers, and the like—are also bearing the brunt of the April trade tax increases.
Consumers in Europe, the UK, Mexico, and Canada are paying between 0.3% and 1.9% less for the consumer appliances they buy than was the case in March of this year. The US consumer, meanwhile, is paying (on average) 3.6% more for their appliances than they were before Trump’s trade taxes.
Appliance exporters to the US have shown no inclination to offset (or “pay”) the trade taxes with lower export prices. In fact, US import prices for appliances (before tariffs are added) have risen a little since March. Domestic producers have also been raising prices—perhaps reflecting higher component costs, but perhaps also reflecting a preference for profit over market share.
The headline numbers will take time to reflect the full effect of trade taxes. But looking at detailed data where taxes are being imposed, it seems clear that the burden falls on the US consumer, not the exporter.