How Much Are Tariffs Pushing Up Prices? As the U.S. and China continue threatening each other with more tariffs, David Greene talks to David Wessel, of the Brookings Institution, about how much tariffs are actually impacting prices.
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How Much Are Tariffs Pushing Up Prices?

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How Much Are Tariffs Pushing Up Prices?

How Much Are Tariffs Pushing Up Prices?

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DAVID GREENE, HOST:

The U.S. is poised to impose tariffs on more Chinese goods this week. No surprise - China is expected to retaliate. All of this despite the fact that a delegation from Beijing is due in Washington this month to try and reduce these trade tensions. Now, we have reported a lot on the effects of tariffs on U.S. farmers, also U.S. manufacturers. But we wondered whether any of this is showing up in the prices that you, American consumers, are paying.

And so let's turn to David Wessel. He's director of the Hutchins Center at the Brookings Institution and a contributor to The Wall Street Journal. And he's always here to answer questions like this for us. Hi there, David.

DAVID WESSEL: Good morning.

GREENE: So are we paying higher prices, and can you link those higher prices to these tariffs?

WESSEL: The short answer is yes. Now, of course there are lots of things that matter to the cost of living that are more important than tariffs - what happens to the price of oil, for instance, or what's happening to housing prices and rents. But the government measures show a 50 percent increase in the cost of - in the price of washing machines largely because we've put tariffs on imported washers. And that's allowed domestic makers...

GREENE: Not the time to buy a washing machine.

WESSEL: Absolutely not. Rad Power Bikes - it's a company in Seattle that makes e-bikes in China, although they're designed in Seattle - it says it's raising the price of its basic model by 200 bucks this week because of the tariffs. A company called Polaris that makes popular boats, motorcycles, snowmobiles, they say they've raised prices because they have to pay more for imported aluminum and steel. And Coca-Cola says it's raising the price of a can of soda that it's charging retailers because there's a tariff on the aluminum that goes into the can.

GREENE: OK. So Coke is something a lot of people will be paying for, if - though, I mean, motorcycles, snowmobiles, Rad Power Bikes, those are - I mean, this is a thing, but it's not affecting everything so far. Or could it? I mean, if there are more and more tariffs like we're going to see this week, could this keep happening?

WESSEL: Well, it's not going to affect everything. Americans make most of what we consume. But if there's no resolution to the trade dispute, yes, more prices are likely to go up. Just how much - well, it depends on what companies do. Different businesses will make different decisions. Some will absorb the cost of the tariffs in their profits and not raise prices so much. Others will raise prices.

And of course producers always want to raise prices. A lot have been trying to do it for the last couple of years and have been unable to do so. If you raise prices, you're never going to say it's because, well, I want to make more money. You're going to blame it on the tariffs. And it's also important, remember, that not all prices will go up. For instance, the price of almonds grown in the United States is going down sharply. Why - because the Chinese put tariffs on U.S.-grown almonds, so the Chinese are buying less of them.

GREENE: Oh, that's interesting. David, did the president and his administration see all of this playing out this way and decide that it was just worth doing this anyway?

WESSEL: Well, what the president sees is a bit beyond my competence. But there are a couple of possible explanations here. One is that President Trump thinks it would be good for the U.S. overall if we relied more on domestic manufacturers than imports 'cause that would mean more jobs here in the U.S. even if it means that those workers have to pay more when they go to the store. And the second possibility is this is a bargaining tactic. Inflict some pain on the Chinese, a little pain here, and it's temporary in order to get better trade deals in the long run.

GREENE: Well, I mean, briefly, who is winning here, the U.S. or China? Like, who's more vulnerable, who's less vulnerable?

WESSEL: I think that the impact of the tariffs so far on either economy has been modest. But if this persists, I think China's more vulnerable. They simply export a lot more of their GDP than we do. Twenty percent of the Chinese GDP is exports, only 12 percent of ours.

GREENE: David Wessel is director of the Hutchins Center at the Brookings Institution, contributor to The Wall Street Journal and also a frequent guest on our show, which is good for us. David, thanks.

WESSEL: You're welcome.

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