The trade war with China has created headwinds for the U.S. economy. Uncertainty over the trade war prompted Federal Reserve Chairman Jerome Powell to cut interest rates to instill confidence within the business community Questions remain over how much the trade war has hurt the average American. President Donald Trump’s economic advisor, Larry Kudlow, and Missouri State Representative Maria Chappelle-Nadal are at odds over the trade war’s true cost. Kudlow believes the the impact on consumers could be negligible:

“All of this is just going to add up,” said David French, senior vice president at the National Retail Federation. “At some point, whether it’s this holiday season or some time next year, the full pain is going to come home to roost.”

Store owners might try to absorb the cost of the tariffs at first, to keep customers happy. But ultimately, French said, those import taxes will show up in the prices people pay at the cash register.

The administration downplays those warnings.

“Any consumer impact is very, very small — minuscule,” White House economic adviser Larry Kudlow told reporters Friday. “Consumer spending and consumer wages and salaries are all booming. It’s the strongest part of the economy.”

Thus far, tariffs have excluded consumer goods like clothing and toys. A large percentage of clothing, toys, and shoes are made in China. These items could be targeted in Trump’s next round of tariffs, which could happen next month. If tariffs are imposed, retailers could bear the brunt of higher costs; they may ultimately have to pass cost increases onto the consumer.

Such price increases could disproportionately hurt lower-income individuals who likely have less disposable income vis-a-vis wealthy individuals. Lower-income individuals may have to cut back on monthly spending to counteract increased costs. The fall out could be a hit to gross domestic product (“GDP”). In Q2 2019 GDP grew 2.1%. Personal consumption expenditures (“PCE”) represented about two-thirds of GDP and were responsible for the lion’s share of GDP growth.

Maria Chappelle-Nadal Predicted The Trade War Would Hurt Consumers

Two years ago I started Trump And The Global Economy (“Trump And The GE”) town hall to discuss President Trump’s policies and their impact on the economy. The August 2018 event featured economics professor Lance Brofman, and Missouri State Representative (and former Missouri State Senator) Maria Chappelle-Nadal. In the following video, Ms. Chappelle-Nadal explains (1) how working class individuals have a higher tax burden and are more negatively impacted from rising prices and (2) protectionism can cause rising prices, which could hurt people (working class individuals) in her community the most.

Chappelle-Nadal 16:55 Mark:  We have a higher tax burden though. People who are everyday Americans working one or two jobs, who are trying to measure how much electricity they are going to use because they don’t want to spend all of their paycheck … that’s the greatest group of people we should be concerned about … I believe we have a false bottom in the economy. Even when we’re looking at unemployment rates … I think there are more people who are unemployed, it’s just they are not factored into the calculation

Chappelle Nadal 25:30 Mark: I want to pick up on Taiwan just a bit. I remember going with a couple of different groups to represent the state of Missouri in our chamber of commerce. … The economic policy in Taiwan is a little more different than China’s. They are interested in trade. They really do want to have memorandums of understanding so that they can get our beef in exchange of some of the great assets they have.

Taiwan is one of those places … cell phone parts … they are one of the best in the world … They have a huge shipping industry as well. Because of their disposition worldwide they would be (under a different administration) … way more open to do business with not only states … but as a country if we are trying to operate together to benefit the needs and wants of each entity then we have to have a more open policy. Protectionism is not the way to go and hurts the people in my community the most.

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