A new report from the National Retail Federation (NRF) warns that former President Donald Trump’s proposed universal tariffs could have severe consequences for American consumers, potentially leading to a dramatic rise in prices on essential items like clothing, toys, household appliances, and more. Trump’s trade policies, if enacted, may disproportionately affect low-income families, create inflationary pressures, and reduce consumer spending power.

Trump has suggested that he would impose a 10% to 20% tariff on all imports, with particularly high rates—between 60% and 100%—on goods from China. This approach, he argues, would counteract decades of perceived economic disadvantage in global trade. However, the NRF’s report suggests that such tariffs would place a significant financial burden on American families, especially those already struggling with high living costs. Mark Zandi, Chief Economist at Moody’s, described the tariffs as “a massive tax increase” on consumers, warning that price hikes on everyday imports would cut deeply into household purchasing power and the broader economy.

According to the NRF’s findings, prices in retail categories like clothing, toys, furniture, and household goods would experience double-digit increases. For instance, the cost of clothing could increase by 12.5% to 20.6%, meaning an $80 pair of jeans could end up costing between $90 and $96. A $100 winter coat might rise to between $112 and $121. These price increases could especially burden low-income households, who, according to the Bureau of Labor Statistics, allocate a larger share of their budgets to essential goods like clothing than high-income households do.

The NRF report also highlighted that toys could see the most significant price spikes, with increases ranging from 36.3% to 55.8%. This would mean that a $200 crib, for example, could increase to as much as $219. For families with young children, such substantial increases could make necessary purchases considerably more difficult, further straining household budgets.

On a macroeconomic level, the NRF estimates that such across-the-board tariffs could reduce U.S. consumer spending by $46 billion, diminishing purchasing power as a result of higher costs across nearly all retail sectors. With higher prices, consumers may cut back on other expenditures, potentially slowing economic growth and impacting retail sales.

Trump’s trade policy ideas, however, resonate with voters who feel disillusioned by decades of free trade policies that, they believe, have undermined American manufacturing and devastated factory towns. Many voters see Trump’s aggressive stance on trade as a potential solution to restore U.S. manufacturing jobs. Yet, experts argue that universal tariffs may not achieve the intended outcome. During Trump’s first term, tariffs on foreign metals, washing machines, and other imports led to mixed results, with little impact on overall job creation in the industries they were meant to benefit. A working paper from a nonpartisan research group found that, despite these tariffs, job growth in affected sectors did not meet expectations.

Mary Lovely, a senior fellow at the Peterson Institute for International Economics, argues that new tariffs would likely encourage companies to shift production from China to other low-cost countries, rather than relocating to the U.S., where wages are significantly higher. “It is very unlikely that many jobs will be created in these industries,” Lovely noted. Instead, she explained, Americans may face price hikes without seeing a corresponding increase in employment opportunities.

Additionally, Trump recently introduced another controversial proposal, threatening a 25% tariff on Mexican imports if Mexico does not enforce stricter border controls. This proposed tariff is not included in the NRF’s report but has already sparked debate. Critics argue that such policies could damage trade relations with one of the U.S.’s largest trading partners and create further price increases for goods imported from Mexico.

Vice President Kamala Harris has seized upon the economic criticism surrounding Trump’s tariff plans, branding them as a “Trump sales tax” on American consumers. She has advocated for a more targeted approach, focusing on specific industries or countries rather than imposing sweeping tariffs across the board. Harris argues that targeted measures could address trade imbalances without imposing unnecessary costs on U.S. households.

In the complex landscape of international trade, experts contend that while tariffs can offer short-term relief to certain industries, they may also result in unintended consequences for consumers. History suggests that tariffs often lead to price hikes and supply chain shifts rather than a resurgence in domestic manufacturing jobs. While Trump’s tariff proposals appeal to voters frustrated by economic displacement, economists caution that the real impact may be higher prices for American consumers rather than a boost in U.S. jobs.

The NRF report, combined with insights from economists, raises critical questions about the viability and potential risks of broad-based tariffs. As Election Day approaches, the debate over the future of U.S. trade policy remains a contentious topic, with significant implications for American consumers and the economy at large.

(Adapted from CNBC.com)

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy