For Americans, it will be mostly quiet on the trade war front, Sec. Ross declares.
Commerce Secretary Wilbur Ross concedes that prices in the U.S. will increase as a result of the new China tariffs put in place by President Donald Trump.
However, Ross told CNBC on Tuesday, “Nobody is going to actually notice it at the end of the day,” because the hikes will be “spread across thousands and thousands of products.”
It will be a teeny-tiny wafer thin price hike. No big deal.
Ross didn’t explain how or why price hikes in China will be large enough to cause a giving of fucks. Possibly because he doesn’t really care if anyone believes him. A Business Insider article suggests Ross’ analysis of the situation is not reality-facing, to put it mildly.
Inflation has stayed relatively tame since the trade war picked up in earnest at the end of June. But certain items that were hit by tariffs have seen dramatic price increases.
Additionally, while imports only make up a sliver of the overall economy, domestic producers are also expected to raise their prices in response to the tariffs as they gain pricing power. This means that along with a direct increase in prices for the Chinese goods that face the new duties, similar goods in the US may also become more costly.
These secondary effects could also send ripples around the economy, as the as the uncertainty around trade policy could dampen consumer confidence and make companies more hesitant to commit long-term capital toward investments.
“The wide range of targeted products should have significant effects on supply chains and may adversely affect both consumers and business sentiment,” Lewis Alexander, the chief US economist at Nomura, wrote Monday. “In particular, recent University of Michigan surveys indicated that consumers have become increasingly aware of trade tensions.”
But surely it will be over by Christmas.
The Trump administration on Monday announced tariffs of 10 percent on another $200 billion worth of Chinese imports, rising to 25 percent at the end of the year.
In response Tuesday morning, China said it will institute retaliatory tariffs on U.S. goods worth $60 billion on Monday.
Before China weighed in, Ross said on “Squawk Box” that China is “out of bullets” to retaliate because its imports to the U.S. are nearly four times larger than the U.S. exports to China.
Maybe not Christmas of this year.