The Fifth Column 

The Trade War begins, how tariffs work, and what that means for you

(TFC) – The opening shots of the largest trade war in history were fired this morning at midnight EST. President Trump’s tariffs went into effect.

“China is forced to strike back to safeguard core national interests and the interests of its people,” said the Chinese commerce ministry. China is expected to return fire by adding tariffs to American-made products in the automotive, meat, and seafood industries. These are industries where his base voters work.

Trump has promised to retaliate against any response from the Chinese with more tariffs imposed on their products. In fact, he described possible escalation to reporters while on Air Force One.

“Thirty-four, and then you have another 16 in two weeks and then, as you know, we have 200 billion in abeyance and then after the 200 billion we have 300 billion in abeyance. OK?” Trump said. “So we have 50 plus 200 plus almost 300.”

That means tariffs on $550 billion in imports. Of course, the United States only imports about $506 billion each year. While the President’s numbers may be off, his message is clear. He plans to slap a tariff on all Chinese imports. A threat that is terrifying markets worldwide. It also has consumers in the United States shaking in the boots as well, if they understand how tariffs work.

How Tariffs work:

China shipping

Image Source: PughPugh, Flickr, Creative Commons

The importing country taxes the exporting country at a percentage, in this case, 25%. The exporting country then must raise prices to pay for the tax. The consumer, that’s the average American, pays for the tax at the checkout counter.

As it stands, Americans can expect to see the prices of auto parts, industrial machinery, and medical devices increase by at least 25%. Those are the tariffs that have already gone into effect. If you don’t buy industrial machinery, you can expect to see the prices of the products made with industrial machinery increase as well.

If China and Trump follow through with their promises, Americans can expect to pay more for just about everything, as the tariffed goods will drive up costs on untariffed items. Specifically, expect an increase in the cost of computers, electronics, clothing, anything made of plastic or rubber, and furniture. Cell phones and general household goods are also going to be hit.

Analysts at financial papers are suggesting the trade war will last into next year.

Keep in mind as prices skyrocket, Trump told Americans he believed they were paid too much in 2015. 

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