Escalating tensions between two of the largest economies of the world, U.S. and China, reached another level at the beginning of this month after President Trump announced an increase in tariffs on $200 billion of Chinese goods from 10% to 25%. Further, he also threatened to apply 25% tariffs on the remaining imports from China worth around $300 billion.
However, according to chief U.S. economist at Nomura - Lewis Alexander, levying 25% tariff on all Chinese goods entering American borders is likely to hurt U.S. economic growth especially when the economy is already showing signs of a slowdown in the recent months.
He emphasized that the import tariffs are majorly paid by the American importers and the American consumers rather the Chinese, therefore it can result into core inflation in America growing by 0.5% point over the next 12 months.
He further added that owing to this tariff hike the likely impact on U.S. economic growth is how trade developments affect business confidence and investments in the coming months.
The trade war, according to the research published by the New York Federal Reserve Bank, is likely to cost a typical American household $831 per year.