Washington: US President-elect Donald Trump’s recent threats to introduce substantial tariffs on imports, specifically from China, have sparked concerns over their potential to significantly escalate the cost of living for American families. The proposed tariffs could complicate the Federal Reserve’s approach to managing the economy, adding another layer of complexity to the incoming administration’s economic policies.

According to Anadolu Agency, a report by the National Retail Federation highlights that these tariffs could reduce consumer spending power by as much as $78 billion annually, affecting goods commonly found in American households. While there may be some relief through alternative sourcing or increased domestic production, these measures are unlikely to fully mitigate the financial impact on households.

Trump’s tariff proposals include a universal tariff ranging from 10% to 20% on all imports, with additional tariffs between 60% and 100% on Chinese goods, layering them on top of existing dutie
s. If enacted, these measures would significantly increase the cost of essential consumer items such as clothing, toys, furniture, household appliances, footwear, and travel goods. The report underscores that even with alternative supply sources and potential domestic production, the tariffs on these six product categories alone could diminish American consumers’ spending power by $46 billion to $78 billion each year they are in effect.

Currently, tariffs on these categories are relatively low, often in the single digits. However, the extreme tariff scenario outlined in the report could result in total average tariffs exceeding 50%. Beyond squeezing household budgets, the proposed tariffs could also negatively impact the broader economy. For the six categories analyzed, the tariffs are projected to reduce US gross domestic product by up to $50 billion annually and diminish average household spending power by $362 to $624 each year they remain in effect.

The report highlights the widespread impact such tarif
fs could have, emphasizing that families would face steeper prices on everyday essentials. Critics argue that while tariffs aim to protect domestic industries, they often lead to higher consumer costs, squeezing household budgets and curtailing economic activity. As Trump prepares to assume office on January 20, the debate over balancing trade protectionism with economic affordability is expected to intensify.

Higher tariffs are likely to drive up inflation as imported goods become more expensive, posing challenges for the Federal Reserve. The Fed’s policies of monetary easing, such as maintaining low interest rates to support economic growth, could be jeopardized by the inflationary pressures resulting from tariff-induced price increases. This scenario might compel the Fed to tighten monetary policy sooner than anticipated, which could curb borrowing, investment, and economic momentum, further straining household finances.

Experts have weighed in on the potential inflationary impact and the Fed’s response.
Nancy Vanden Houten, lead economist at Oxford Economics, noted that if implemented, the tariffs would likely be inflationary, creating challenges for the Federal Reserve. She emphasized that while the tariffs could lead to higher consumer prices, the overall economic impact might be more nuanced. She cited Trump’s first term, suggesting that these threats might serve more as negotiating tactics than firm policy decisions.

Sant Manukyan, head of Investment International Markets Department at Trkiye’s Is Bank, remarked that the tariffs implemented during Trump’s first term largely persisted under current President Joe Biden, with some even increasing. He explained that the new tariffs could result in a one-time price spike, but whether this would lead to permanent inflation remains uncertain. Manukyan cautioned against overly aggressive inflation expectations, suggesting that without a clear, sustained inflation trend, the Fed might not take action.

In a further escalation, Trump vowed to impose tariffs on Ca
nada’s and Mexico’s imports to the US, citing their involvement in the flow of deadly fentanyl and migrants as justification. This move targets three of the US’s top trading partners, which together account for 43% of all US goods imports. According to Goldman Sachs, the proposed tariffs on these nations could generate nearly $300 billion in annual revenue, albeit at a significant cost to consumers and the broader economy.