President Donald Trump’s latest tariffs on Chinese imports threaten to jeopardize the expansion of the U.S. economy.
As reported by the Washington Post, that’s because the latest slate of tariffs that took effect Sunday (Sept. 1) are primed to take a real bite out of consumers’ wallets, just as consumer spending that has been propping up economic growth looks to be softening. The 15% duties on about $112 billion worth of goods will raise prices on items from clothing and footwear to sports equipment and televisions. While the Trump administration formulated earlier rounds of tariffs to try to shield consumers, hitting only 29% of so-called final goods from China, with the latest round, that number jumps to 69%, according to the Peterson Institute for International Economics.
That will swell the tab for the average American family from $600 a year from earlier rounds of tariffs to $1,000, per JPMorgan Chase.
Strong consumer spending has helped prop up economic growth even as other categories of activity have flagged in recent months. Business investment and manufacturing for example both contracted in the second quarter. But the economy expanded at a rate of 2 percent over that time
Yet new data show consumer sentiment may be more fragile than it has appeared. The closely watched University of Michigan consumer sentiment index just registered its biggest monthly decline since December 2012. Back then, shoppers were worrying over the uncertainty spawned by “fiscal cliff” negotiations in Washington. Now, survey director Richard Curtin said, the potential impact of tariffs is sapping confidence.
“The August data indicate that the erosion of consumer confidence due to tariff policies is now well under way,” Curtin said in a release accompanying the new data. “While the overall level of sentiment is still consistent with modest gains in consumption during the year ahead, the data nonetheless increased the likelihood that consumers could be pushed off the tariff cliff in the months ahead. This could result in a much slower growth in consumption and the overall economy.”
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