How’s that trade war working out for us?

2018 saw the Trump Administration start trade wars with other nations, principally with China, under the premise that the U.S. trade deficit was too large.  China is also accused of forcing U.S. companies to transfer their technology to the Chinese in order to do business in that country.  China is also a culprit in stealing intellectual property.

To address these concerns, the Trump Administration increased tariffs on all sorts of imported goods.  The theory was that the exporting countries, China specifically, would suffer economically bringing them to the negotiating table to stop their economic pain.

How’s that working out?

Our Federal Reserve Bank of New York and two universities did the research and here is what they found about our trade war in 2018:

  • The U.S. tariffs were almost completely passed through to the American consumer at a cost of at least $6.9 billion in higher prices.
  • There was no impact on the prices received by foreign exporters.

We sure showed those other countries a thing or two, didn’t we?

But while businesses passed through the extra tariff-related costs to the consumers, that didn’t mean that U.S. businesses, small businesses specifically, were not harmed.

That $6.9 billion consumers paid in higher prices on imported goods meant that consumers did not have that $6.9 billion to spend on other goods and services in their local communities.

So, while the Trump Administration wants to help big corporations that either voluntarily hand over their technology secrets to China or have their intellectual property stolen, consumers and small businesses are paying the price.

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