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NY Fed study: New tariffs on China goods to cost US consumers $106.07B annually

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NY Fed study: New tariffs on China goods to cost US consumers $106.07B annually

Consumers in the U.S. will face a total annual bill of $106.07 billion due to the latest hike in tariffs on Chinese imports, according to new research from economists at the Federal Reserve Bank of New York.

The estimated total annual cost from the higher tariffs includes $26.94 billion in added tax burden for consumers and $79.13 billion in "deadweight" losses, which are a result of companies' reorganization of their supply chains.

The New York Fed economists said deadweight losses "tend to rise more than proportionally as tariffs rise because importers are induced to shift to ever more expensive sources of supply as the tariffs rise."

For a typical U.S. household, the latest round of tariffs will have an annual cost of $831, including $211 in additional tax payments and $620 in deadweight losses.

"[T]hese higher tariffs are likely to create large economic distortions and reduce U.S. tariff revenues," the report's authors wrote.

Separately, the International Monetary Fund said both U.S. and Chinese consumers are "unequivocally the losers from trade tensions," warning that more import restrictions would make consumer goods less affordable and hurt low-income households disproportionately.

"While the direct effect on inflation may be small, it could lead to broader effects through an increase in the prices of domestic competitors," IMF officials wrote in a blog post.

The IMF said the latest tit-for-tat tariff moves between the U.S. and China will reduce about 0.3% of global GDP in the short term.

Failure to resolve trade issues and escalation of tensions "could further dent business and financial market sentiment, negatively impact emerging market bond spreads and currencies, and slow investment and trade," the IMF warned.