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- The cost of tariffs are increasingly poised to fall onto those who can least afford them.
- Lower and middle class Americans spend a higher portion of their income on targeted Chinese imports.
- The newest round of tariffs is also expected to disproportionately affect women.
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As trade tensions between the US and China escalate, the costs of tariffs are increasingly poised to fall onto those who can least afford them.
President Donald Trump has levied punitive tariffs of between 15% and 30% on thousands of Chinese goods over the past year and announced plans for further escalation. Those import taxes have begun to hit far more household products, raising prices further for lower-earning Americans.
“Higher taxes on these goods are likely to be highly regressive, in that lower and middle class Americans spend a higher portion of their income on these Chinese imports than do higher income Americans,” said Mary Lovely, a trade scholar at the Peterson Institute for International Economics.
Business representatives have issued similar warnings to the Trump administration, testifying in public hearings over the past year that tariffs could cause them to raise prices for vulnerable consumers.
The newest round of tariffs is also expected to disproportionately affect women, whose spend more on some targeted products including apparel. About 42% of women’s and girl’s clothing was shipped from China in 2018, a recent Wall Street Journal analysis found, compared with 26% for men and boys.
“The combination of higher tariff rates and greater spending on imported goods means that women carry a significantly higher share of total tariff burden compared to men,” researchers wrote in an International Trade Commission paper in 2018.
The Trump administration is looking into a proposal to lower taxes by the same amount the Treasury Department takes in from tariffs, which stood at about $63 billion in the 12 months that ended in June. But it isn’t clear whether that plan would be able to get through Congress or how it would translate to the lowest income brackets.
A 2017 Center for Economic and Policy Research paper found that in the early 2000’s, removing tariffs would have a larger stimulative effect for lower-income Americans than cutting taxes.
“Removing the tariff burden would have a considerably larger impact on poor households than the 2001 and 2003 tax cuts, which were estimated to reduce taxes for the bottom quintile of households by $28 to $87 dollars per year,” the paper said. ” If tariffs were raised by 10 percentage points across the board, [household costs] would have risen by $301 and $307 for the lowest two income deciles.”