Donald J. TrumpTrump places tariffs on Chinese imports, Washington, USA - 22 Mar 2018US President Donald J. Trump speaks before signing a presidential memorandum targeting what the White House termed 'China?s economic aggression' in the Diplomatic Room of the White House in Washington, DC, USA, 22 March 2018. China is threatening retaliation for the tariffs on $50 billion US dollars (40 billion euros) of Chinese imports, sparking further fears of a trade war.

As President Trump’s latest round of levies on Chinese imports hits the market, the fallout is expected to negatively impact consumer spending. In response, credit rating firm Experian is warning consumers of the risk to income and their credit rating.

In a report by Matt Tatham, manager of content insights and data analyst at Experian Consumer Services, a division of Experian, the firm tallied the expected costs of U.S. tariffs on imports. The analyst said the “bottom line is these tariffs may cost [consumers] a few extra bucks for certain items such as jeans, pet food, frozen chicken nuggets, whiskey and possibly more in the future. Tariffs can lead to increased costs.”

By way of example, Tatham said based on a 25 percent tariff on steel imports, “if a carmaker uses $600 worth of imported steel to make one vehicle, the tariff would translate to a $150 increase in material costs that can be passed on to the consumer in either higher prices or lower incentives [or both].”

Tatham noted that the cost of tariffs on U.S. imports could eventually total $37 billion for aircraft, cars, beef, orange juice, steel, aluminum, soybeans and plastics, among other items. Washing machines and other grades of steel and aluminum along with beverages such as roasted coffee and whiskey could add another $13 billion. And denim, T-shirts, corn and peanut butter, as well as fruit and pork products, could add an additional $7 billion to $10 billion.

These anticipated higher costs come at a time when the economy is on solid footing, Tatham said, adding that at the same time, “Federal Reserve Bank chairman Jerome Powell says gradual interest rate hikes should continue as planned, with the low unemployment rate and higher inflation numbers supporting the case.

“Consumers should plan to spend more because interest rates will increase,” the analyst said. “[Consumers] should also prepare for the scenario of higher inflation that results in even higher interest rates on credit cards, home equity line of credit [or HELOCs], mortgages and auto loans. All of which means you can expect to pay more on your monthly bills.”

Tatham said since credit card interest rates are connected to Fed policies and the central bank ends up increasing rates by 2 percent over time, consumer annual percentage rates would increase, too.

“Loans for cars and homes are not tied directly tied to the Fed Funds Rate but they typically follow along accordingly,” he added. “If a trade war breaks out and inflation rises, you could expect to see increases in auto and home loan rates and even additional costs.”

 

 

 

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