Who pays for Trump's tariffs?

Straits Times

21 hours ago

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Higher tariffs on goods from dozens of trading partners kicked in on Aug 7, ranging between 15 per cent and 41 per cent.
PARIS - US President Donald Trump says the United States will reap billions of dollars from his tariff blitz, but who pays the bill?
Higher tariffs on goods from dozens of trading partners
kicked in on Aug 7 , ranging between 15 per cent and 41 per cent.
Here is a look at the effects of Trump's tariff onslaught.
Higher prices for US consumers?
The tariffs are paid by US-based companies to US customs when they import goods from abroad.
US consumers could see a range of products become more expensive if companies choose to raise prices to offset the higher costs of importing goods.
For instance, Japanese cars face a 15 per cent tariff, while made-in-Vietnam T-shirts now have a 20 per cent duty.
But companies have other options: they can absorb the higher cost, which would hit their bottom line, or they can try to negotiate lower prices with exporters.
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US Federal Reserve chairman Jerome Powell estimated at the end of July that higher tariffs were beginning to be felt on certain goods.
For example, the US toy company Hasbro, maker of the Monopoly board game and the owlish electronic toy Furby and which imports half of its products from China, began raising prices in May and June.
Procter & Gamble, the maker of Tide laundry detergent and Pampers diapers, has projected a US$1 billion (S$1.29 billion) hit from US tariffs over the next year said it would institute limited price hikes in the United States.
The tariffs are even more problematic for US economic sectors which don't have an option to switch to local suppliers, said Dr Philippe Chalmin, emeritus professor at Paris-Dauphine University.
The United States imports lots of copper, a key metal in electrical machinery and wiring, which Mr Trump announced would face a 50 per cent tariff on August 1.
'Half of what the United States needs is imported from Chile, and following the announcement the price of copper on the US market rose 25 per cent compared with the global reference price,' said Dr Chalmin.
In the end, however, the Trump administration backpedalled and applied the tariff only to semi-finished copper products such as pipes and wires.
Loss of competitiveness
The bill could also weigh on companies which depend heavily on exports, with the rising prices of their products in the United States leading to a loss of competitiveness.
This is the concern for the European wine and spirits sector, which has yet to obtain an exception from US tariffs.
Higher prices on Champagne or Chianti could easily push US consumers to grab a bottle of Californian wine.
The impact 'will be all the harsher' since in addition to the tariffs the value of the dollar has fallen, which further increases the price of the bottles on shelves in US shops, warned Mr Gabriel Picard, president of the French Federation of Wine and Spirits Exporters.
He estimated that this combined effect could result in a €1 billion (S$1.49 billion) loss for French producers.
'There will be sectoral differences and even within the same sector, it will depend on the negotiating power' between the producer, the wholesaler, and the retailer, said Mr Bruno de Moura Fernandes, head of macroeconomic research at Coface, a firm which provides insurance and financial services for exporters.
However, he said that the effect will be especially significant for industries already facing difficulties remaining competitive against their American counterparts, notably in chemicals and steel sectors.
Thinning margins
Some companies have already announced that they will cut into their profit margins to offset the effects of US tariffs.
Automakers, among the first affected by US tariffs, have already seen sales and profits hit.
German auto giant Volkswagen said in July that US tariffs had cost it €1.3 billion in the first half of the year as it reported falling profit.
It now forecasts a profit margin for the year of between four and five per cent, down from 5.5 to 6.5 per cent previously, amounting to billions of euros for the group.
US tariffs prompted Japanese auto giant Toyota – the world's largest carmaker by sales, to cut its annual net profit forecast by 14 per cent. AFP