Trump tariffs to test resiliency of US consumers

Donald Trump lambasted globalization as a raw deal for the United States that has devastated US manufacturing towns.

Trump left out the upside to the United States from the liberal flow of goods: a reliable supply of affordably priced appliances, clothing and electronics whose consumption has helped lift US economic growth above other developed economies in recent years.

«Obviously we've benefited significantly,» said Paul Gruenwald, global chief economist at S&P Global Ratings. «We get to consume a lot of things that are produced more efficiently in other countries.»

Trump's tariffs are almost certain to negatively impact this dynamic, say economists who see the levies lifting the price on everything from Gap t-shirts to the Apple iPhone to French wine.

«This is very clearly going to raise consumer prices,» Michael Pearce, a US economist with Oxford Economics, said of the barrage of levies announced late Wednesday in an unveiling the White House billed as «liberation day.»

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Winners in Trump's policy include communities that benefit from reshored manufacturing, while losers include export-focused industries like plane manufacturing and pharmaceuticals if there are retaliatory tariffs, Pearce said.
But imports represent only about 14 percent of US gross domestic product, while exports account for 11 percent — figures that are even lower if energy is taken out. Moreover, goods account for one-third of US consumption compared with services, which comprise the rest.

«The net impact on the US economy may be surprisingly small given the headlines we're seeing,» said Pearce, who warned that Trump's levies could end up disproportionately hurting low-income consumers if the tariffs are paired with tax cuts that