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Analysis: Tariffs Would Cost $82.3B 07/02 06:13
WASHINGTON (AP) -- An analysis finds that a critical group of U.S. employers
would face a direct cost of $82.3 billion from President Donald Trump's current
tariff plans, a sum that could be potentially managed through price hikes,
layoffs, hiring freezes or lower profit margins.
The analysis by the JPMorganChase Institute is among the first to measure
the direct costs created by the import taxes on businesses with $10 million to
$1 billion in annual revenue, a category that includes roughly a third of
private-sector U.S. workers. These companies are more dependent than other
businesses on imports from China, India and Thailand -- and the retail and
wholesale sectors would be especially vulnerable to the import taxes being
levied by the Republican president.
The findings show clear trade-offs from Trump's import taxes, contradicting
his claims that foreign manufacturers would absorb the costs of the tariffs
instead of U.S. companies that rely on imports. While the tariffs launched
under Trump have yet to boost overall inflation, large companies such as
Amazon, Costco, Walmart and Williams-Sonoma delayed the potential reckoning by
building up their inventories before the taxes could be imposed.
The analysis comes just ahead of the July 9 deadline by Trump to formally
set the tariff rates on goods from dozens of countries. Trump imposed that
deadline after the financial markets panicked in response to his April tariff
announcements, prompting him to instead schedule a 90-day negotiating period
when most imports faced a 10% baseline tariff. China, Mexico and Canada face
higher rates, and there are separate 50% tariffs on steel and aluminum.
Had the initial April 2 tariffs stayed in place, the companies in the
JPMorganChase Institute analysis would have faced additional direct costs of
$187.6 billion. Under the current rates, the $82.3 billion would be equivalent
on average to $2,080 per employee, or 3.1% of the average annual payroll. Those
averages include firms that don't import goods and those that do.
Asked Tuesday how trade talks are faring, Trump said simply: "Everything's
going well."
The president has indicated that he will set tariff rates given the
logistical challenge of negotiating with so many nations. As the 90-day period
comes to a close, only the United Kingdom has signed a trade framework with the
Trump administration. India and Vietnam have signaled that they're close to a
trade framework.
There is a growing body of evidence suggesting that more inflation could
surface. The investment bank Goldman Sachs said in a report that it expects
companies to pass along 60% of their tariff costs onto consumers. The Atlanta
Federal Reserve has used its survey of businesses' inflation expectations to
say that companies could on average pass along roughly half their costs from a
10% tariff or a 25% tariff without reducing consumer demand.
The JPMorganChase Institute findings suggest that the tariffs could cause
some domestic manufacturers to strengthen their roles as suppliers of goods.
But it noted that companies need to plan for a range of possible outcomes and
that wholesalers and retailers already operate on such low profit margins that
they might need to spread the tariffs costs to their customers.
The outlook for tariffs remains highly uncertain. Trump had stopped
negotiations with Canada, only to restart them after the country dropped its
plan to tax digital services. He similarly on Monday threatened more tariffs on
Japan unless it buys more rice from the U.S.
Treasury Secretary Scott Bessent said in a Tuesday interview that the
concessions from the trade talks have impressed career officials at the Office
of the U.S. Trade Representative and other agencies.
"People who have been at Treasury, at Commerce, at USTR for 20 years are
saying that these are deals like they've never seen before," Bessent said on
Fox News Channel's "Fox & Friends."
The treasury secretary said the Trump administration plans to discuss the
contours of trade deals next week, prioritizing the tax cuts package passed on
Tuesday by the Republican majority in the Senate. Trump has set a Friday
deadline for passage of the multitrillion-dollar package, the costs of which
the president hopes to offset with tariff revenues.
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