"US import price data… indicate that prices on goods from China have so far not fallen", economists Matthew Higgins, Thomas Klitgaard and Michael Nattinger wrote in the piece posted on Monday. "As a result, US wholesalers, retailers, manufacturers, and consumers are left paying the tax".
While the Trump administration has imposed tariffs on hundreds of billions of dollars of imports from China, the impact on Chinese firms itself has been minimal as they have either reduced the prices of US-bound goods or found new markets altogether, said the writers, all of whom work for the research and statistics unit of the Federal Reserve Bank of New York.
"Chinese firms could lower the prices they charge to offset the tariff hikes in order to avoid losing market share in the United States", the three economists said. "Chinese firms will be more prone to lower prices to the extent that they believe US purchasers can either do without their products or find alternatives from other suppliers".
But data from the Office of the US Trade Representative also showed US market share for Chinese machinery and electrical equipment down by roughly two percentage points and for electronics off by close to 6 percentage points from 2017, suggesting that Chinese firms had found other markets, the writers said.
"A broader look at the trade data shows that China’s lost market share has gone largely to Europe and Japan for machinery and to Malaysia, South Korea, Taiwan, and Vietnam for electronics and electrical equipment", they wrote.
The trio noted that tariffs were collected at the port of entry by US customs, with the duty paid by the immediate US purchaser of the goods.
"In effect, the US purchaser pays a sales tax to the Customs Service for the right to import", the article said.
It also pointed out that Chinese firms with few non-Chinese competitors will feel little pressure to adjust, leaving the tariff burden to the US buyer.
