Study by the New York Federal Reserve estimates the Trump tariffs will soon be costing U.S. households more than $800 a year

By Daniel Griswold. Excerpt:

"The Trump administration and China plan to resume high-level talks in October on the dispute over Chinese interests’ use of American intellectual property, but no one is optimistic that the escalating trade war will end anytime soon. According to President Trump, that would be just fine.

By all accounts China is feeling the pain of U.S. tariffs, and Trump points to the tens of billions of dollars in extra revenue that his tariffs are raising for the U.S. Treasury. “We don’t need China and, frankly, would be far … better off without them,” the president tweeted in August. But a growing number of Americans beg to differ, and members of Congress have already introduced legislation to curb the president’s use and abuse of current trade laws.

If this were a real war, we would call it a quagmire with mounting casualties. U.S. manufacturing output and employment growth have slowed sharply in recent months, while business investment slumped in the second quarter. A new U.S. Chamber of Commerce analysis found that 43 percent of Fortune 500 CEOs expressed concerns about tariffs or trade uncertainty in recent earnings calls.

First in the line of fire in the tariff war have been American importers and consumers. Trump tariffs will soon hit the clothing, shoes, furniture, household appliances and consumer electronics imported from China that make life better every day for tens of millions of American households, especially lower-income families that spend a higher share of their budgets on tradable goods. A study by the New York Federal Reserve estimates the Trump tariffs will soon be costing U.S. households more than $800 a year.

For U.S. companies, the tariffs on imported materials and components from China are disrupting long-established supply chains, raising production costs, and making their final products less competitive in global markets, with no quick or obvious alternatives available.

The trade war is also costing American exporters market share in the world’s second-largest consumer market. Last year, China was the fourth-largest market for U.S. exports of goods and services, behind only the European Union, Canada and Mexico. China is (or at least was until recently) a major purchaser of U.S.-made passenger vehicles, aircraft, semiconductors and chemicals, as well as U.S. farm products.

American companies are also at risk of losing market share for their operations inside China. In 2017, according to the Bureau of Economic Analysis, U.S. multinational companies sold $375 billion worth of U.S.-branded goods and services through their affiliates in China, returning $25.9 billion to the United States in profits. The next phase of the trade war could see China turning the screws on those companies with discriminatory regulations, forcing U.S. firms to cede further market share to their international rivals.

Another toll from the trade war could be higher interest rates as Chinese investment in the United States falls. The flip side of the bilateral trade deficit with China has been a steady inflow of Chinese capital that helps to finance the U.S. government’s insatiable appetite for debt. Whatever dollars the Chinese don’t spend on U.S. exports, they’ve spent buying U.S. Treasury bonds. That investment has reduced long-term interest rates in the United States, lowering the federal government’s borrowing costs while also reducing mortgage rates for millions of U.S. homeowners."