‘Hidden sales tax’: How Trump’s tariffs will impact prices — and what consumers can do about it

Personal finance

In the midst of a tit-for-tat trade war between the U.S. and China, Labor Day sales may be your best chance to avoid the impact of higher prices for some products you buy.

Tariffs on goods traded between the two countries have already increased in several stages since early 2018 and recently escalated again.

Just last week, President Donald Trump said he would raise existing duties on $250 billion worth of Chinese products to 30% from 25% on Oct. 1. Additionally, he said, tariffs on another $300 billion of Chinese goods, which start to take effect on Sunday, will now be 15% instead of 10%.

“It is like a hidden sales tax, one that does not appear on your receipt but comes out of your pocket nonetheless,” said Katheryn Russ, a University of California, Davis, professor of economics and specialist in international trade.

As of the latest tally, the new tariffs will mean higher prices on many consumer staples, such as clothing, shoes, toys and household appliances, including toasters, coffee makers, irons, microwave ovens and hair dryers.

However, some goods originally set for increased levies in September, including cellphones, laptops, video game consoles and some footwear, will be delayed until mid-December to avoid dampening the Christmas shopping season.

You should assume that everything you’re buying has been marked up by 20%.

Michael Bonebright

senior blog editor at DealNews

“It is hard to predict exactly which goods will have the most noticeable price increases because retailers have said they plan to spread increases across other goods, as well, so that they generate less sticker shock for buyers,” Russ said.

“That doesn’t lessen the overall cost for consumers.”

The newest round of tariffs on Chinese goods could cost the average American household $1,000 a year, according to an estimate by J.P. Morgan.

Buying anything on sale, when you can, is a good way to lessen the blow, according to Michael Bonebright, a senior blog editor at comparison shopping site DealNews.

“You should assume that everything you’re buying has been marked up by 20% because of tariff-related production costs, so look for products that are marked down by at least 20%,” he said.

Buy now: Appliances, cars and summer clothes

The Labor Day holiday is a particularly good time to “shop large appliances and clearance summer clothes,” Bonebright said.

“If there is a certain thing you have your eye on, things that you know are made abroad, now is certainly a good time to get a discount on them,” said Jill Gonzalez, an analyst at WalletHub.

For example, Home Depot, Lowe’s and Sears are discounting some appliances, including dishwashers, refrigerators, microwaves and washers and dryers, by 40% as part of Labor Day sale events. A Kenmore French-door refrigerator is currently $1,200, about half off.

A customer views washing machines for sale at the Airport Home Appliance store in Redwood City, California, July 30, 2019.

David Paul Morris | Bloomberg | Getty Images

Summer wear will also be significantly marked down as retailers aim to clear out last season’s inventory. “If you can get away with clearance clothes, go ahead and buy them; they will be much cheaper,” Bonebright said.

At Macy’s, the Labor Day sale includes apparel and footwear marked down 40% to 60%.

However, it will be harder to snag a deal on fall and winter clothing and shoes. Those items are rarely included in Labor Day or Black Friday sales and don’t get marked down significantly until January at the earliest, according to Bonebright.

“Wait until next spring if you can,” he said. “Those post-season discounts will help take care of increased production costs.”

More from Personal Finance:
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What you should do now to avoid a tax surprise next year

Car shoppers will also fare better at the Labor Day sales events this weekend. The new tariffs could bring price increases on newer models that rely on imported parts from China. In addition, dealers are eager to clear out older inventory ahead of the fourth quarter.

In addition, auto loan rates are still relatively low, which brings the overall cost down on new and used vehicles.

Currently, the average five-year new car loan rate is 4.63%, while the average four-year used car loan rate is 5.34%, according to Bankrate.com.

Buy later: TVs, game consoles and smartphones

As for smartphones and other electronics, holding off until Black Friday — Nov. 29 this year — is your best bet, Bonebright advised.

Laptops, video game consoles, televisions and most phones won’t be deeply discounted until the day after Thanksgiving — with the exception of iPhones.

Apple isn’t known for its mark downs, but, generally, when a new model is introduced, there’s a price drop on the previous generation.

The tech giant already hinted that the next iPhone could be announced as soon as Sept. 10, which makes that a particularly good time to buy older iPhones. (And most of the time, you don’t even need a new phone.)

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