Goldman Sachs claims that the cost of Trump’s trade war has fallen almost completely onto the shoulders of American businesses and consumers. And the bank believes that the on-going trade war could ultimately weigh down America’s GDP by .4 percent.
Currently, some $200 billion worth of Chinese goods are facing tariffs of 25 percent. Analysts had previously believed that Chinese manufacturers would have to bear part of the burden by lowering prices to compete in the American market. However, studies have revealed that Chinese manufacturers have not actually dropped prices.
Instead, consumers are paying more for goods as Chinese manufacturers hold firm. Further, American companies have actually raised their prices as the cost of Chinese goods have gone up. Some analysts are arguing that this has been an opportunist move to drive up profits.
President Trump had argued that China would ultimately end up paying for the tariffs. So far that hasn’t happened, although the effects of the recent tariff increase are not yet clear. It’s possible that China will have to share more of the burden.
The trade deficit with China has fallen to a three-year low but the overall trade deficit continues to rise. In March, the trade deficit rose 1.5 percent, reaching $50 billion, far above historical norms. Imports from Germany have reached record highs. Meanwhile, the trade deficit with China declined by $13 billion compared to a year ago.
President Trump has also called for $15 billion in funding to buy American crops that will then be used as foreign aid. American crop exports have been hit hard by the on-going trade war with China, with soybeans, in particular, taking a heavy hit.
