How does the washing effect work?
In 2018, Donald Trump decided to impose a 20% tariff on the importation of washing machines from China, with the objective, supposedly, to protect the jobs of Americans.
The effect on job creation was expensive, according to Economists from the University of Chicago And the Federal Reserve, US consumers had to pay $ 817,000 in higher prices for each job created, in the washing machine industry. And extra $ 900,000, for each job created in the steel industry.
In fact, after four months of implementation of the tariffs, the prices of the washing machines rose 12% and no longer returned to the prices of the beginning of 2018, even after the tariffs were withdrawn.
Can it happen again?
According to specialists, if Trump imposes 25% tariffs on Canadian and Mexican goods, the effect on the productive chains of the region would be immediate, but it would concentrate on industries such as automotive.
This 2025, tariffs would affect almost a quarter of the 16 million cars that are sold a year in the United States, as well as auto parts and other components for their manufacture and maintenance. And, according to Wofe Research analysts, this could increase by about $ 3,000 the average price of a new car, for US consumers.
Why does this happen?
According to analysis Made by economists of the United States Federal Reserve, there are mechanisms that make imports most exposed to imports suffer the effects of tariffs.
First, the costs of the inputs increase, by reducing the offer of certain products to manufacture cars, for example. Secondly, at the time they turn to local producers, they are in an advantage position. Since being protected by tariffs, they have the economic power to increase prices and margins.
Thirdly, tariffs are not paid by companies that export from Mexico, Canada or China. Or at least not in its entirety. According to Banco ING, in the case of washing machine tariffs, 60% of the cost of tariffs were absorbed by final consumers. The rest was distributed among the exporters, which reduced the price and assumed losses, and the importers, who also reduced their margins.
