After implementation of tariffs of up to 145% on all imports from China, negotiators
were able to agree to a temporary reduction to a 30% levy. This rate is planned to be in
place for a maximum of 90 days, providing a reprieve as trade talks continue.
China is an important US trading partner, with 2024 imports of more than $438.9
billion and exports of $143.5 billion. Top imports include various types of consumer
electronics, computer equipment, machinery, and toys. In addition, US imports of
iron and steel from China totaled almost $12.0 billion last year. Many of these prod-
ucts are integral to the US manufacturing supply chain as well as important to con-
sumers. China is also the source of large proportions of specific products such as
computers and related equipment. Tariffs have the effect of raising prices as
importers pass a portion of the costs along to US consumers and firms. In addition,
dynamic effects are initiated through the economy.
The Perryman Group estimated the overall net economic cost of the tariffs,
fully accounting for anticipated changes in purchasing and production patterns and
other responses. The Perryman Group estimates that the cost to the US economy of a sustained 30%
tariff on imports from China would include $173.3 billion in annual gross product each
year and almost 1.4 million jobs when multiplier effects are considered. In addition to
the very large negative impacts on a variety of consumer-oriented segments such as
retail trade, US manufacturing sectors such as electronic equipment would be negatively
affected. (See the accompanying table for results by industry.)
Tariffs would also likely lead to inflation as additional costs are passed on to
consumers. The Perryman Group’s analysis indicates that if these tariffs are sustained,
the impact on overall inflation would be an increase of almost one percentage point,
with the effects on some of the most impacted products (including many consumer
goods) being much higher. The estimated effect on an average household would be
costs of more than $1,000 per year when all inflation and supply chain effects are con-
sidered. Beyond the negative effects on individuals, families, and businesses, increased
inflationary pressures could ultimately lead to less expansive interest rate policy by the
Federal Reserve. Clearly, imposing substantial tariffs on major trading partners is costly for all nations involved. If a lasting agreement is not reached, it is likely that China will respond
with retaliatory tariffs on US exports, which ultimately has the effect of making American products less competitive and, over time, likely decreasing export volumes.
Higher tariffs increase prices, reduce trade, and cause harms across affected economies.
They also create an environment of uncertainty, which can further erode business activity.
An expedited resolution to the current tariff strife is in the best interest of consumers,
businesses, and all affected countries throughout the world.
