How the Tariff War Impacts Consumers

Hershey Kisses

Earlier this year, President Donald Trump enacted steep tariffs against foreign aluminum and steel. Many of the affected countries have responded with their own retaliatory measures, most notably China. Since then, China and the Trump administration have gone back and forth, hitting each other with punitive tariffs against a wide range of products.

Intended Vs. Actual Effects of the Tariffs

Trump’s tariffs were originally designed to help bolster domestic aluminum and steel producers. The aluminum and steel industries have suffered a lot over the past few decades, in large part because China saturated the market with low-cost metals, making it exceedingly difficult to build any kind of competitive edge, both at home and in the global market.

Although the tariffs were intended to be a boon to American metal producers and, by extension, the American manufacturing industry as well as the national economy, many companies — across a range of different industries — have been dealing with negative impacts. And many companies that have yet to be affected by the tariffs are starting to grow concerned.

The new tariffs were intended to make foreign aluminum and steel less attractive to American manufacturers by making these metals more expensive. This way, metal users would turn to American mills for their raw materials. However, around the time the tariffs went into effect, domestic steel and aluminum prices shot up. So now, whether manufacturers are using offshore or American metals, they’re still paying more than they were before.

Key Industries Affected by the Tariffs

The automotive industry, which is heavily reliant on aluminum and steel, is one of the more visibly affected sectors. In order to alleviate some of the new financial strain being imposed upon them, car manufacturers will have to raise their retail prices.

Other companies, such as soda, beer, and soup companies, have also said that their prices are likely to go up in order to cover the extra costs. However, both Commerce Secretary Wilbur Ross and the New York Times have estimated that the new cost of canned food items is likely to be minimal.

Hershey’s, which uses a large amount of aluminum foil in their packaging (e.g., Hershey’s Kisses), will also have to raise their prices. Hershey’s has decided to attack the cost from several angles — for example, by focusing on packaging design.

Companies are also being affected as the trade war between the United States and China continues to escalate. As the weeks go by, more and more products are being added to the tariff lists. While this doesn’t directly disrupt all businesses, any company with a tariffed product that sells a substantial amount of that product to China is likely to feel the strain.

In order to mitigate these new expenses, companies are placed between a rock and a hard place: either raise their prices or throw their company into disarray. Without raising their prices, companies risk pay cuts, mass layoffs, and diminished product quality. These companies are also limited in their ability to grow and strengthen their business.

China’s Retaliatory Tariffs

China has made it clear that, while they will only issue tariffs against American-made products in a reactionary capacity, they intend to play hardball. For example, China has doled out hefty tariff rates, some as much as 50%, and has imposed tariffs on an extensive and diverse list of products, which hits America’s most lucrative markets. The country is also cracking down on supply chain loopholes that allow exporters to move their product through other countries in order to bypass the Chinese tariffs.

From nuts to chocolate to candles to markers to plastic storage bins, almost every industry is likely to feel the pinch to some degree. Some companies aren’t extremely dependent on Chinese transactions, and can therefore start working on developing relationships with other entities if necessary. But many businesses are unable to do so.

The most recent round of tariffs was placed against assorted tech products, including consumer electronics like wireless headphones as well as internet networking equipment.

Huge corporations such as Apple and Google will likely be able to absorb the added tariffs cost, but smaller companies without billions of dollars in reserve will have a harder time weathering the storm and will likely be forced to raise their prices substantially. Some economists point out that even the largest companies will only be able to absorb the costs for so long, and eventually will also have to raise their prices.

The Tariffs’ Impact on Consumers

If the situation continues to escalate, it’s likely that consumers will end up footing the bill for the trade war. But the battle is far from over, and we will continue to report on this story as it develops.

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