Since tariffs began to be applied to China, and even before that, the main American media warned that the measure would end up increasing consumer prices. Now, however, The Washington Post, one of the most critical of the Trump administration, has acknowledged that its predictions were wrong.
On Friday, Jan. 17, the U.S. daily newspaper published an article by its economic correspondent Heather Long in which she analyzes the impact of the tariffs applied to Beijing, due to unfair competition.
“Most of the costs were absorbed by U.S. companies, which is why consumers haven’t seen excessive sticker shock at stores,” wrote Long, taking the case of a Colorado-based women’s clothing factory as an example.
Indeed, American companies, whose sales and profits have been boosted by President Donald Trump’s historic tax cuts, have absorbed most of the tariffs instead of passing them on to American households.
In her article, Long noted that last year the headlines of major U.S. media, including The Washington Post, proclaimed that Trump’s tariffs on Chinese imports could cost the average American family $1,000 more a year.
The shocking figure came from an analysis by JPMorgan that assumed the total cost of the tariffs would be passed on to consumers.
Mainstream media got it wrong
“But that is not what’s been happening,” said Long, adding, “The evidence so far indicates that most American firms passed only a fraction of the cost increase on to consumers—more in the range of $100 per family a year.”
Moreover, a recent study found a “quite modest” price difference between retail products that were affected by tariffs and those that were not, suggesting that companies and retail chains are absorbing the costs of tariffs.
Work by economists from Harvard University, the University of Chicago, and the Federal Reserve Bank of Boston detailed that the increase in the price of dishes, furniture, bedding, toasters, towels, and umbrellas affected by the tariffs was less than 1 %.
Likewise, the price of electronics only increased by 1.4 %.
President Trump has urged U.S. companies to stop producing in China and move elsewhere, preferably to the United States.
And that’s what seems to be happening.
According to a December analysis by the Federal Reserve Bank of St. Louis, large American companies have begun to move production to other countries. Indeed, while imports from China fell, those from Taiwan and Vietnam increased in 2019.
In fact, China seems to be the most affected in the rigorous trade negotiations: its economic growth in 2019 reached a 29-year low (6.1%).
After hard negotiations, Washington and Beijing signed Phase 1 of the trade agreement last Wednesday, Jan. 15.
According to media reports, China committed to buying $200 billion of U.S. products, including at least $50 billion in agricultural products over two years.
At the same time, the United States will halve tariffs of 15 percent on Chinese imports of $120 billion, but leave tariffs of 25 percent on additional imports of $250 billion.
In addition, the increase in the tariff rate that was planned for October, as well as the imposition of new tariffs that was scheduled for December, will not take effect.
What happens if the CCP tries to back out
Treasury Secretary Steven Mnuchin warned that if China does not comply with its trade commitments, President Trump could reapply the tariffs.
“Today we take a momentous step, one that has never been taken before with China, toward a future of fair and reciprocal trade as we sign Phase One of the historic trade deal between the United States and China,” President Trump announced Wednesday.
“Together, we are righting the wrongs of the past and delivering a future of economic justice and security for American workers, farmers and families,” he said.