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Trump trade war: Washing machines are case study for recent tariffs

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washing machine tariff china
This
May 21, 2018, photo shows a row of washing machines for sale at
Lowe’s Home Improvement store in East Rutherford, N.J. President
Donald Trump acted to impose new tariffs on imported solar-energy
components and large washing machines in a bid to help U.S.
manufacturers.

AP/Ted
Shaffrey


  • The Trump administration on Monday enacted a 10% duty
    on another $200 billion worth of Chinese products.
  • That is in addition to $50 billion worth of import
    taxes already enacted.
  • Economists say washing machine prices, which have risen
    sharply under tariffs this year, serve as a case study for the
    latest round of trade barriers. 

As the trade war between Washington and Beijing escalates, price
tags on washing machines may offer a glimpse of what’s ahead for
American consumers. 

Another round of tariffs on Chinese imports takes effect Monday,
bringing the total value of affected products to $250 billion,
roughly half of what the US bought from China in 2017. And
economists say with an
increasing number of consumer items
 subject to import
taxes, Americans should brace for new levels of sticker shock by
the end of the year.

“There are some lessons to be learned from the tariffs imposed
earlier this year, with laundry equipment, AKA washing machines,
serving as a case study,” Jeffries economists Ward McCarthy
and Thomas Simons wrote in a recent research note. 

In one of its first “America First” trade policies and in
response to complaints by companies of unfair global competition,
the Trump administration in January announced hefty tariffs on

washing machines and solar panels
. The tariff rate on laundry
equipment imports was set at 20% up until a quota of 1.2 million
per year is reached and 50% after that. 

Since then, Americans shopping for washers and dryers have seen a
historic rise in prices. Labor Department data showed
washing-machine costs rose 15% a month in the three months to
August, the most in more than a decade. Prices had declined more
than 5% year-over-year in 2017 and edged lower during the
first quarter of 2018.

“The surge in prices is quite impressive because these prices had
been quite soft in previous years,” McCarthy and Simons
wrote. 

While those placed on washing machines were blanket tariffs, they
targeted Asian manufacturers. The New Jersey-based Whirlpool
Corporation, which was at the center of
a campaign to lower foreign access
 to the American
washer and dryer market, has long accused its South Korean rivals
of dumping and other trade practices perceived as unfair. 

Also like laundry-equipment trade barriers, the structure of the
latest round of duties could cause inflation to rise with a
lag. McCarthy and Simons expect the tariffs to put modest
upward pressure on inflation by year-end and then accelerate next
year if the rate is raised to 25%.

“Tariffs very much complicate the inflation picture going
forward,” the economists said, adding there is both incentive to
accelerate imports from China before the higher tariff is out in
place or look to other markets for substitutes. 

The Federal Reserve, which is expected to announce its latest
policy decision Wednesday, has also been weighing trade
uncertainty against the humming economy. In its
latest meeting minutes
, the central bank said all
participants pointed to ongoing trade disagreements as a source
of risk that could affect growth and inflation. 

“Wide-ranging tariff increases would also reduce the
purchasing power of U.S. households,” the central bank
said. 

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