Washing Machine Tariffs Started the Trade War. Result? Largest-Ever Three-Month Increase in Washing Machine Prices

Trump’s ill-advised trade war is really largely a war on Americans

If you’re unfortunate enough to be shopping for a new washing machine, you can thank the Trump tariffs on imported washing machines, washing machine parts, steel, and aluminum for the largest three-month price increase—16.4% from February to May this year—in the 40-year history of the Bureau of Labor Statistics (BLS) series for Major Appliances: Laundry Equipment that started in January 1978 (see chart above).

In the May Consumer Price Index (CPI) report (see Table 2), the one-month increase in the CPI for Laundry Equipment of 7.4% in May followed a 9.6% increase in April, and in both months was the largest monthly price increase of any of the 300 individual CPI categories or sub-categories. For the month of May, the 7.4% increase in the washing machine series was twice the increase of the next highest increase of 3.7% for educational books and supplies (mostly college textbooks).

The Background

The Trump tariffs on imported washing machines were announced in late January 2018, took effect the next month in February, and are scheduled to continue for the next three years. In the first year, there is a 20% tariff on the first 1.2 million imported washing machines with an increase to 50% subsequent machines.

Imported washing machine parts are also subject to a 50% tariff, which will likely drive costs higher for domestic appliance manufacturers like Whirlpool, as well. In addition to the tariffs on washing machines and parts, Team Trump also imposed tariffs of 25% on steel imports and 10% on aluminum imports that took effect in late March. Those tariffs on key inputs for washing machine production are also likely at least partly responsible for the 16.4% price increase for the final product at the retail level.

Interestingly, Goldman Sachs analyst Samuel Eisner forecast back in January following the start of the Trump Trade War that was initiated with the tariffs on imported washing machines that U.S. consumers could expect price increases of between 8% and 20% for new washing machines depending on how much of the tariff gets passed on to consumers. According to this CNBC report from January:

The Trump administration announced Monday it will impose a 20% tariff on the first 1.2 million imported large residential washing machines in the first year and a 50% tariff on machines above that number. For his part, Sachs analyst Eisner expects the same level of imports in 2018 as in years past, around 3.4 million washing machines. His assumption implies an effective tariff rate of roughly 40%, and if international suppliers pass along half the cost of the tariff, Americans could wind up shelling out a premium.

Backfire Economics

Likewise, Trump’s ill-advised trade war, which started in January when he approved the tariffs on imported washing machines, is really largely a war on Americans.

As simple economics tells us, the Trump tariffs on washing machines aren’t imposed on foreign appliance producers like Samsung and LG as much as they are imposed on Americans in the form of higher prices for consumers. Likewise, Trump’s ill-advised trade war, which started in January when he approved the tariffs on imported washing machines, is really largely a war on Americans. The February-May 16.4% increase in the CPI for washing machines is just the first of many price increases on U.S. consumers and firms from Trump’s trade war that are guaranteed to lead to net job losses and impoverish, not enrich Americans.

Reprinted from the American Enterprise Institute.

Further Reading

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