What’s going on here? The US government announced fresh taxes – a.k.a. tariffs – on $18 billion worth of Chinese imports. What does this mean? The US brought in tariffs on Chinese products over five years ago, and now it’s kicking them up a notch. Specifically, semiconductor tariffs will double from 25% to 50% by next year, directly impacting the chips that vehicle, aerospace, and defense sectors rely on. The EV industry will be hit particularly hard, with tariffs on electric cars moving from 27.5% to an eye-watering 102.5% this year. On top of that, lithium-ion batteries will see levies rise from 7.5% to 25%, while solar panel tariffs will also double to 50%, potentially reshaping the US renewable energy sector. Why should I care? The bigger picture: Write a pros and cons list. The increased tariffs – which will be phased in over the next two years – are designed to protect jobs and critical industries in the US of A. But that comes with risks: if history’s anything to go by, China will respond with fresh tariffs of its own on US imports. That would likely push down sales for stateside firms that rely on international trade and add another drag on the economy. In fact, Goldman Sachs previously estimated that every percentage point increase in the tariff rate would shrink the US economy by 0.03%. For you personally: Up, up, and away. Tariffs typically spark up inflation, because companies pass higher costs onto customers. And while the US insists that these new taxes are targeted enough to avoid widespread damage, any increase in inflation could force the Federal Reserve to delay cutting US interest rates. After all, April’s producer price inflation came in higher than expected on Tuesday, and economists may now expect the same from consumer prices on Wednesday, suggesting there’s little wiggle room in getting inflation down and stable. | 