Last year, president Donald Trump imposed a hefty 20 percent tariff on imported washing machines to deter foreign companies from selling to American consumers and competing with American manufacturers. But, according to a new research conducted by University of Chicago researchers and a Federal Reserve Board Governor, American shoppers are the ones paying a majority of the additional fee, NBC News reports.
The study found that after the tariffs were implemented, the price of washing machines rose 12 percent, or roughly 90 dollars per unit.
“It’s a good example of how the benefits of free trade are extremely diffuse but then the benefits of protectionism are concentrated, said Brookings Institution senior fellow David Dollar.
Altogether, American consumers are shelling out an additional $1.5 billion solely as a result of the tariff. In even more aggregated terms, a joint study by economists from Princeton University, Columbia University, and the New York Fed concluded that Americans pay $1.4 billion a month for all of Trump’s tariffs and trade sanctions.
While the University of Chicago researchers studied tariffs which only directly affected foreign-manufactured washing machines, they found that the price hike impacted the industry as a whole. “Taking the effects on both goods together, the overall tariff elasticity of consumer prices is above 100 percent for the 2018 safeguard tariffs,” they wrote. “The costs of these 2018 tariffs are substantial.”
Though drying machines weren’t targeted by the tariffs, the price of dryers rose in conjunction with the rising prices of washers. Domestic washer manufacturers also raised their prices with the tariff imposed on imports.
“Firms are operating in competitive markets and they’re going to try to charge what they can,” said Dollar. If the competition is suppressed, companies can charge a higher price without much fear of retaliation from other firms.