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What worries economists the most is that the tax proposed by President-elect Donald Trump on the import of goods will increase the price of food.
Trump campaigned on a promise to lower household costs as costs rose across the economy. Consumer goods are no different, as prices rise due to a combination of economic factors, including regional tensions, weather events, supply disruptions and inflation.
Although the rate of inflation has moderated, rising 2.6% in October, grocery costs are 20% to 25% higher than they were four years ago.
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A proposed tariff of 10%-20% on imports from all foreign countries and a proposed additional tax of 60%-100% on imports from China may exacerbate the situation as consumers will bear the brunt of the cost increase, David Ortega, food economist. and professor at Michigan State University told FOX Business.
“Taxes increase the cost of goods at home by increasing the cost of production and reducing competition. Ultimately, the higher costs are passed on to consumers, and low-income families bear the burden,” said Ortega.
Trump-Vance transition spokeswoman Caroline Leavitt told FOX Business that during Trump’s first term, the tariffs imposed on China “created jobs, stimulated investment and did not cause inflation.”
He said Trump plans to restore the economy in part by “reviving American jobs, lowering inflation, raising real wages, lowering taxes, cutting regulations and freeing up American power.”
Signs in the produce section of Target Corp.’s flagship store. in Edina, Minnesota, US, on Thursday, September 5, 2024. (Ben Brewer/Bloomberg via Getty Images/Getty Images)
But when low-income families spend a large portion of their income on food, they will be forced to make tough trade-offs such as cutting back on other essentials like housing, health care or transportation to ensure they can still put food on the table. , said Ortega.
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Duke University economics professor Felix Tintelnot said that since the proposed import tax would be imposed on all countries, “one cannot move production to bystander countries” to avoid pushing higher costs on consumers.
A woman shopping for groceries in Brooklyn, New York, on Sept. 15, 2023. (Paola Chapdelaine of The Washington Post via Getty Images/Getty Images)
In 2018, when import tariffs were imposed on all countries that exported washing machines or iron to the United States, they increased prices significantly for consumers, according to Tintelnot.
If tariffs are imposed, domestic producers’ imports will increase, including other input costs such as fertilizers, farm equipment and ingredients used by food producers to make food.
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Tintelnot said that if foreign food prices rise due to costs, domestic producers may increase their prices to take advantage of the increased demand for their products.
Apples are displayed at a grocery store on June 11, 2024, in San Anselmo, California. (Justin Sullivan/Getty Images/Getty Images)
But Ortega warned that these tariffs could lead to other consequences, including retaliatory tariffs from other countries.
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“Regarding revenge, recent history shows us that other countries will not remain silent,” he said.
Ortega talked about the US-China trade war six years ago in which China responded with retaliatory tariffs that affected American farmers.
Retaliatory tariffs caused a drop of more than $27 billion (or an annual loss of $13.2 billion) in US agricultural sales from mid-2018 through the end of 2019, according to 2022 data from the Department of Agriculture. China accounts for about 95% of the losses, the ministry said.
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