In response to President Trump’s trade war against China, bargain retailer Dollar Tree announced this week that it will be increasing prices in some stores by up to $4. The move effectively passes on the burden of the Trump administration’s 25 percent tariff on goods imported from China, many of which keep Dollar Tree shelves stocked. The strip mall price hike shows how tariffs act as a de facto tax hike on low- and middle-income families, specifically on goods made for children.
It’s important to know that price hikes like those coming from Dollar Tree aren’t a surprise. Economists predicted that increased U.S. tariffs and tariffs levied in retaliation would ultimately hit consumers. A study earlier this year by the pro-free trade economic policy consortium Trade Partnership Worldwide found that a trade war’s impact on the economy would require a family of four to find an additional $767 a year to pay for the increased costs of goods.
That amount may seem small when amortized over 12 months, but despite a booming economy, many families simply will not be able to absorb the additional costs from a trade war. Consider a report by the nonprofit Prosperity Now that found 13 percent of households in the U.S. fell behind in their bills in 2018. A full 22 percent of homes earning under $30,000 were unable to keep up with their bills. A third of Dollar Tree customers live on less than $25,000 annually. A majority of Dollar Tree customers earn less than $49,000.
One very good example of how the trade war affects families with children is the increasing cost of shoes. Chinese-made shoes were one of the first products to be hit with Trump tariffs. Retailers absorbed the cost of tariffs by raising shoe prices. That may not be a burden for an adult whose feet have stopped growing, but developing children need new shoes about twice a year on average — more if they are particularly active and rough on their kicks. For each child, the average American family spends around $388 on shoes. Tariffs increase that $130 annually. That’s because 60 percent of all shoes sold in the United States are imported from China at an average cost of $13 including the current duty of 9.5 percent and markup. Add a 25 percent duty increase and the numbers look different over time.
While Dollar Tree is the first retailer to actually test higher prices as a direct result of tariffs, many other retailers have suggested they will follow suit. Those retailers include family-friendly retailers like Target, Wal-Mart, and even Costco.
Worse, Trump has threatened to increase tariffs to 30 percent on all imported goods from China. Currently, toys have been spared from the trade war. But the United States imports $25.52 billion in toys annually from China, and if Trump were to go through with the additional tariffs, toy prices could be hit incredibly hard. The result? Most likely kids with fewer toys.
It’s clear that while the current administration claims to be on the side of the average American, Trump’s policies continue to hit middle- and low-income earners. While the president has suggested weathering the pain of tariffs is a patriotic act, it might be hard for parents to explain to kids that they have to deal with holes in their shoes in the interest of protecting the intellectual property and patents of multinationals. That’s not to say that kids couldn’t benefit in the long term if a trade war led to more favorable import-export deals, but it is to assert, based on a great deal of evidence, that the short term might be a bit rough.