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How the 2024 election could impact the U.S. economy and inflation – Expert analysis

How the 2024 election could impact the U.S. economy and inflation – Expert analysis

As the political landscape shifts with the return of President-elect Donald Trump, U.S. retailers face significant challenges tied to his proposed import tariffs. These tariffs are expected to result in higher costs for American consumers, as retailers who rely on foreign suppliers may pass these expenses onto consumers.

The National Retail Federation recently reported that American households could see a decrease in spending power, with losses estimated between $46 billion and $78 billion annually. This development could affect the prices of everyday items such as clothing, toys, and household appliances. According to the NRF’s findings, essential products will see price jumps: a toaster oven priced at $40 could rise to between $48 and $52, and a $50 pair of running shoes might escalate to $59 to $64. Similarly, a $2,000 mattress set could soar to anywhere from $2,128 to $2,190.

During his first term, Trump’s administration enforced tariffs up to 25% on over $360 billion worth of Chinese goods. The current Biden administration maintained many of these tariffs and introduced additional taxes on specific imports, including electric cars and microchips from China. Now, Trump has proposed a sweeping 60% tariff on imports from China and a general 10% to 20% tax on the approximately $3 trillion in foreign goods that the U.S. imports each year. Economists, including Treasury Secretary Janet Yellen, have cautioned that such extensive tariffs could exacerbate inflation, placing the financial burden squarely on U.S. consumers.

Research from the nonpartisan Budget Lab at Yale University reaffirmed that the burden of tariffs tends to fall on consumers and domestic businesses rather than foreign countries. In a recent analysis, they emphasized that tariffs effectively serve as a tax that U.S. importers must pay, not the exporting countries. Meanwhile, the Peterson Institute for International Economics conveyed that these proposed tariffs could lead to regressive tax consequences, costing an average middle-income household about $1,700 annually. This shift would disproportionately affect lower-income families, according to their policy brief from August.

Although the timeline for implementing these tariffs remains uncertain, experts suggest that the necessary legislative processes could delay any notable economic impact until 2026.

Key issues that influenced the 2024 presidential election results

Former U.S. Treasury Secretary Lawrence Summers has raised concerns regarding the rationale behind taxing imports, especially with the holiday season approaching, a time when many toys are sourced from China. His comments reflect broader apprehension about the implications of heightened tariffs on consumer goods.

Trump maintains that his tariff strategy is intended to encourage domestic manufacturing by compelling American companies to prioritize local production. However, industry executives share differing perspectives. Philip Daniele, the CEO of AutoZone, indicated that if tariffs do come into effect, his company would invariably transfer those costs onto consumers. He pointed out that they anticipate such tariff increases and typically prepare to adjust prices accordingly.

Similarly, Stanley Black & Decker’s CEO, Donald Allan Jr., disclosed that preparations for potential tariff hikes had been underway for months, forecasting inevitable price increases. He noted that relocating manufacturing to the U.S. might not be financially viable and that the company could consider shifting parts of its supply chain to alternate locations, such as Mexico or other regions in Asia.

Some companies have already taken steps to mitigate the impending tariff impacts. Acme United, for instance, has redirected production of its Westcott brand products to countries like Thailand and the Philippines to avoid tariffs on Chinese goods. Their adaptations also include moving the manufacturing of certain medical supplies to India and U.S. facilities in states such as Florida and North Carolina.

In anticipation of increased tariffs, businesses have ramped up their import orders, with data from the Census Bureau indicating a significant 11% rise in imports from China during July and August compared to the previous year.

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