Farmers know what impact the trade war with China has on their bottom line. They see it every day in the commodity market.
A new study conducted by the Center for American Progress using methodology in calculations determined by the Federal Reserve Bank of New York brought the reality of the tariffs to individual households.
“One way to estimate the effect of these higher tariffs is to draw on the recent experience of the 2018 U.S. tariffs. The bank’s study found that the 2018 tariffs imposed an annual cost of $419 for the typical household. This cost comprises two components: the first, an added tax burden faced by consumers, and the second, a deadweight or efficiency loss,” according to the Federal Reserve Bank.
Studies, including that of the New York reserve, have found that the tariffs that the United States imposed in 2018 have had complete pass-through into domestic prices of imports, which means that Chinese exporters did not reduce their prices.
Hence, U.S. domestic prices at the border have risen one for one with the tariffs levied in that year. The study also found that a 10% tariff reduced import demand by 43%.
Using that same methodology and combining all of the Chinese tariffs now in place, the average American household will pay $831 per year to cover those tariffs.
The Center for American Progress multiplied $831 per household to determine the trade war’s impact on each state.
Here are the numbers for part of the Midwest:
- Illinois — $3.996 billion.
- Indiana — $2.125 billion.
- Iowa — $1.045 billion.
- Wisconsin — $1.953 billion.
- Missouri — $1.982 billion.
- Kentucky — $1.434 billion.