Rising prices in the USA
Trump’s tariffs make Christmas more expensive
The US economy is driven by consumption more than others. But Trump’s tariffs are now making themselves felt through increased prices. This is now hitting the Christmas business.
It stands like a one, doesn’t need needles and is available with already assembled candles: That’s why more than 80 percent of US households prefer an artificial Christmas tree to a real one – that’s what the American Christmas Tree Association claims. But this year artificial fir trees cost ten to 15 percent more than last year. That’s what Mac Harmon says on NPR. His company Balsam Hill sells all kinds of Christmas decorations.
“In the Christmas industry, 90 percent of the decorations have always come from China,” explains Harmon. This is because they are manufactured in Asia, but not because of their production costs – they haven’t really increased. “It’s just the tariffs that we pay to the US government to bring these items into the country.”
Tariffs higher than they have been in 90 years
In early April, President Donald Trump announced import taxes on goods from virtually every country in the world. A lot has happened since then: Depending on his mood, Trump raised and lowered individual tariffs – and then up and down again. “There’s been an awful lot of drama and confusion and uncertainty and soap operas. But the bottom line is that we’re back to the tariffs that the president originally announced, with a few changes,” said Justin Wolfers, an economist at the University of Michigan.
When Trump took office, the average tariff rate payable was around two percent. It is now around 17 percent – which is the highest it has been in 90 years. That has consequences. “Companies have so far not passed on more than half of the tariffs on consumer goods to consumers, but have allowed their margins to shrink,” explains Gary Hufbauer from the PIIE Institute. This cannot go on forever. “But already now, in the run-up to Christmas, we are experiencing rising prices.”
Households have to pay more
On average, this amounts to an additional burden per household of around $1,700 per year. What Trump said in the spring about the consequences of his tariff policy for consumers is now turning out to be a prophecy:
Americans love to shop. Around 70 percent of the economy depends on consumption. In Germany it is only around 50 percent.
No return of production to the USA
And what if Mac Harmon simply manufactured his artificial Christmas trees with the colorful bulbs in America to avoid tariffs? The company boss waves him off. Production is a “laborious” process. “You use cable ties and clamps to make the lights stand upright. More than 30 years ago, when someone had the idea of offering fir trees with pre-assembled candles, the American workers dismissed it and said: ‘I won’t do that.'”
So manufacturing is not returning to America because of the tariffs, as Trump promised. Economic expert Wolfers also says this: “The employment figures in this sector are falling. This is not new; it has been happening for more than half a century. We are a country that is deindustrializing.” At the same time, services and knowledge-based activities would grow. This is a strength of the US economy.
Rising prices for consumer goods, food and electricity, for housing, for health insurance – the media is now talking about the “affordability crisis”. Opinion polls show that even Trump’s supporters are losing faith in the president’s economic course.
