Tariffs in the US raise prices of goods and hit consumers

WASHINGTON - A tariff imposed by U.S. President Donald Trump has pushed tariffs on imports of foreign goods to their highest level in 90 years, significantly raising costs for American households and businesses.

The new import tariffs, in force since the beginning of August, apply to almost all US trading partners. According to researchers at Yale University, the average tariff rate has risen from less than 2 % in January to more than 18 %, the most since the 1930s.

Economists warn that even though tariffs are formally paid by importers, the final price will be paid by consumers in the form of higher prices. According to Yale's Budget Lab models, the price of shoes could rise by up to 40 %, clothing by 37 %, and common goods such as fruit, kitchen appliances and cars will also become significantly more expensive - new cars could cost thousands of dollars.

Small businesses, especially in the American Midwest, are already facing skyrocketing costs. In St. Louis, for example, retailers are reporting prices from suppliers as high as 30 % - from bicycles and cosmetics to board games. Among the most notable examples are washing machines and wine glasses, which have seen prices rise by up to 35 %. Higher prices are also affecting domestic production, as manufacturers reflect more expensive inputs such as imported steel and aluminium in their prices.

According to Goldman Sachs estimates, by June, firms bore 64 % of the cost of tariffs, consumers 22 % and foreign exporters 14 %. By October, however, the consumer share is expected to rise to 67 %. US producers, protected from cheaper competition, may also raise their prices.

Goldman Sachs projects that, with the tariffs in place, the core personal consumption index (PCE) will reach 3.2 % by the end of the year, while without the tariffs it would be only 2.4 %. In July, core inflation had already reached 3.1 % year-on-year. The current average tariff rate of 18.6 % is thus close to the Great Depression levels.

For the time being, falling energy prices and inventories built up before the tariffs are dampening inflation, but upward pressure on prices will intensify once these inventories are depleted and new contracts are concluded at higher prices. For the US central bank, this means a dilemma: cut interest rates to support employment or face inflation above the 2 % target.

For small business owners like Mike Weiss of the St. Louis bike shop chain, the political debate is far removed from the day-to-day reality of either accepting higher costs or reflecting them in prices to customers - but both come at a price.

Xinhua/gnews.cz - GH