8 Questions About Stalled US-China Trade Talks

The U.S.-China trade talks fizzled out last week, prompting President Trump to make good on his threat to raise the tariff rate from 10 to 25 percent on $200 billion worth of imported Chinese goods. That brings the total to $250 billion at that rate, with the administration promising to identify an additional $325 billion, which would cover essentially all remaining Chinese products imported into the U.S. Here are eight questions about where the conflict stands now.

1) How much is this going to cost me? Tariffs have already hurt consumers. Last year, nearly $69 billion, according to NBER, and the increase to 25 percent on the $200B will likely tack on an average of $500 to $1,000 for consumers this year.

2) Which products could cost more? The tariffs cover nearly 6,000 items, including: furniture, computers and computer parts, leather handbags, backpacks, baseball mitts and ski gloves, the fabric used in fleece vests, dog collars, lighting fixtures, art supplies, ceramic tiles, and windshield glass. Vegetables like cabbage, kale, carrots and beets are also included.

3) What products would be impacted by the $325 billion Chinese imports, not yet subject to the tariffs? This is the group that economists are worried about, because it includes a wide variety of items that consumers use, including: clothing, toys, shoes, furniture not already subject to previous tariffs, electronics, electrical equipment, machinery, prepared food and televisions.

4) Are tariffs good for U.S. producers? NBER estimates that U.S. producers enjoyed gains of $61 billion, because they were able to charge higher prices. A separate study on the impact of duties on washing machines found that prices increased for foreign and domestic manufacturers. Additionally, most brands hiked dryer prices, despite the fact that no tariffs were imposed on them. All told, U.S. consumers spent an additional $86 for each washing machine and $92 for each dryer.

5) Have tariffs led to new U.S. jobs? In some industries, the answer is yes. For example, the washer/dryer machine tariffs helped create roughly 1,800 workers. Unfortunately, those hires resulted in an average annual cost to consumers of over $815,000 per job created (after netting out the collected tariff revenues).

6) How will tariffs impact overall growth? Most economists estimate that if the current tariffs remain in place for the year, it would shave off 0.3 percent from GDP. That means instead of 2.5 percent, the annual pace would drop to 2.2 percent.

7) What’s next? The Chinese retaliated by raising tariffs on $60 billion of U.S. goods, from 10 percent to up to 25 percent starting June 1. While there are no new trade talks scheduled currently, there could be an opportunity next month, when President Trump and President Xi both attend a Group-of-20 meeting in Japan.

8) What was the market reaction to the week of tariffs? Stock market indexes came down from all time (or near all time) highs and fell more than 2 percent last week. The selling accelerated Monday morning, though all U.S. stock indexes are firmly higher on the year. Through Friday, the S&P 500 was up nearly 15 percent and the NASDAQ Composite was ahead by over 19 percent.