That’s Going To Cost You

There seems to be little question that the tariffs signed into effect on Wednesday are going to cost all Americans a lot more. Crunch the numbers, and anyone making less than $120,000 a year is likely to see their budget squeezed beyond the breaking point. Say goodbye to the 40-hour work week as most people will now need to jobs to have any hope of staying afloat. Don’t even think about retiring soon, either. The S&P 500 is down more than 600 points already this morning, and trading hasn’t started yet. That’s your 401K that’s being eliminated.

For all the talk from the President about making everyone rich (a damned lie if we ever heard one), the sad reality is that we are facing monumental price increases, prices that will never come back down to current levels again, even if the tariffs eventually go away. As prices rise on things we value, so does the extent of what a market will bear. Some things may go away completely if the cost of production and related tariffs put prices completely out of reach for most consumers. Those who survive will successfully have extended that market range. Don’t expect them to give up any ground later.

This raises the question of which prices are going to rise the most. It’s not like anything has been especially cheap lately, anyway. Inflation took prices up considerably last year without any added taxes. Now, the tariffs threaten to put some things out of reach. We’ll list just a few of the items at the top.

Anything with electronic components. Sure, we expect laptops and tablets to go up in cost, and with the way Apple stock plummeted yesterday, you can bet that the next iPhone is likely to be $1,000 or more higher than this year’s model. Almost all consumer electronics, including smartphones and computer monitors, are likely to see price increases.

What will catch people off guard is all the items that contain semiconductors and other electronic chips. Things such as household appliances, medical devices, Wi-Fi routers, and LED lightbulbs. And these products often don’t just require one or two chips — new cars contain thousands of them. This is where we are most likely to see dramatic price increases.

Current inventories will keep prices relatively steady for now, but industry estimates show that the current supply of computer chips is likely to run out around August, just in time to hike prices for those back-to-school purchases.

Coffee. This one is really going to hurt. If you thought there was a lot of complaining about the price of eggs, consider that only 10% of the US population eats eggs on a regular basis. Coffee, however, is a daily consumption point for 63% of Americans, and many of us require multiple cups of the stuff to keep us from killing the 37% of people who don’t drink coffee.

The National Coffee Association says that the US imports 99% of all the coffee we consume. We import it from places in South America and Africa that have extra-high tariffs on them. Like it or not, one can’t simply dig up the plants and move them to South Georgia. Coffee doesn’t work like that. Coffee beans need a fairly specific environment, one that is not found anywhere in the continental US. This could make all of our conversations much tenser.

Footwear. China and Vietnam shipped a combined $18.5 billion worth of shoes to the US last year. That’s nearly 70% of all shoes the US imported. For those who are accustomed to paying stupid prices for the latest pair of Air Jordans and such, they may not be too worried at this point. They’re accustomed to stupid prices because that’s what the market will bear. The rest of us, though, need shoes on our feet as well and the mid-range and lower/discount markets are not going to fare well, either.

Consider the fact that one of the ways the President hopes to bring prices back down is by having more manufacturing return to the US. However, that’s not possible with a number of products, and shoes are one of those products. Nike is never going to open a plant in the middle of Kansas. The costs are simply too great. This may mean that you’ll need to tell your children to stop growing because the days of being able to afford a new pair of shoes every 60-90 days are over.

Chocolate. If you’re a regular consumer of these sweet treats, you’ve likely already noticed that prices have been on the climb. Poor weather conditions have impacted the size of crops. As prices have gone up, many candy makers have cut back on portion sizes and are looking for alternatives, such as caramel and nougat.

Again, chocolate is one of those things that simply cannot be grown in the continental US. It doesn’t make sense to even try. Carob may be our saving grace on this front. Carob has less bitterness than chocolate, which may make it a more appealing option for supertasters. If you suffer from migraines and chocolate is one of your triggers, carob may be a helpful substitute, as it doesn’t contain tyramine, an amino acid that can trigger migraines in some people.

Toys. Do your holiday shopping now. Prices will likely start going up in early September. The Toy Association estimates that 77% of all toys sold in the US are manufactured in China alone. “It’s just not an industry that is built to be able to manage through a tariff of that magnitude,” Greg Ahearn, president and CEO of the trade group, told CNN.

Does that include adult toys as well? Probably so. Making the situation worse is the fact that toy sellers are already operating on pretty slim margins. They rely heavily on popular toys that sell in the thousands. With budgets shrinking, parents are going to have less money to pay for all those toys. Think in terms of getting your child one big present instead of fourteen. The Christmas tree isn’t going to be so crowded this year.

Beef. Hamburger prices are already well over six dollars a pound in most places, thanks in large part to diseases and other conditions that have shrunk the size of cattle herds in the US. While it might seem that the answer is to simply raise healthier cattle here at home, the underlying costs of doing so still raise the price well beyond what we’re paying now.

The good news is that there are exemptions for food items grown in Canada and Mexico. This may help beef to remain affordable, and it also likely means that a reasonable supply of fruits and vegetables will continue coming into the country. Don’t feel too good about that situation, though. If Canada and Mexico slap back with high tariffs of their own, then those exemptions on food may go away.

Clothing. The only way this might not be a disaster is if, with prices for chocolate and hamburgers so high, kids eat healthier and don’t need new clothes quite as often. Otherwise, second-hand stores are going to be where the majority of families buy their clothes. High-end fashion labels have already started making adjustments to allow for the price increases, but less than one percent of Americans regularly shop those luxury brands.

Instead, it’s fast fashion stores such as Forever 21 (which is already going out of business) and H&M that are going to feel the pinch the most. Instead of store stock rotating on a six-week average, stores may need to keep the same clothes around much longer in order to keep costs down. Of course, there’s always the option of going naked, but that could make some business meetings … uhm … awkward.

Shrimp and Seafood. No, there’s not a bunch of old Vietnam vets piloting old boats out from the Louisiana coast, providing the majority of shrimp in the country. More than 90% of what we consume comes from just four countries: Ecuador (imports from this country will face a 10% tariff), India (26%), Indonesia (32%), and Vietnam (46%).

Here, the US fishing industry is hoping that this gives it a chance to take over more of the market share. While that might sound like a good thing on the surface, the fact is that every part of that industry, from the boats to the nets to the personelle, costs considerably more in the US and could end up still costing more that tariffed foods.

Can you afford all of this? Probably not. The vast majority of Americans will have to make considerable adjustments to their lives in one direction or another. Multiple jobs, fewer new things, and making more careful choices when shopping are about to become commonplace for many families. Many others will have to make hard decisions, such as whether to have another child, whether to go to college, or perhaps moving into a smaller, less expensive home.

The tariffs aren’t bringing riches to normal people like us. They never have. Our best move is to start planning now for the hardships we’re likely to face later this year.