By Kenneth Rapoza, Industry Analyst, CPA
Washing machine prices rose in 2018 and we are all reminded that tariffs are to blame. But they’ve been coming down ever since, inflation data shows.
When President Trump put 20 percent tariffs on imported washing machines in 2018, there were howls of anguish from free-trade economists. They attacked the tariffs with the same viciousness the Holy Inquisition once used against those who dared to say the earth went around the sun.
If you search for the phrase “washing machine tariffs price increases” online you will get more than 6 million hits. The most popular hits include a 2019 New York Times article that said “Trump’s Washing Machine Tariffs Stung Consumers.” There was also the widely reported study by economists from the Federal Reserve and the University of Chicago that claimed that price increases in washing machines and dryers would cost consumers $1.5 billion.
There’s just one problem with all these studies and press reports. They’re wrong. Today, washing machine prices are at their lowest levels in the last ten years. That’s according to government data. If you look at the Bureau of Labor Statistics data for consumer prices for laundry equipment, you will see that the laundry equipment price index for the first six months of 2020 was just 90.492. This is lower than the price for every six-month period since 2010 with one exception. Today laundry equipment prices are 5.5 percent lower than when President Trump took office in January 2017. They are 19.1 percent lower than they were ten years ago, in June 2010.
It’s true that immediately after the tariff took effect in March 2018, washing machine prices shot up temporarily. By December 2018, they were 13 percent higher than a year earlier. But throughout 2019 and 2020 they have been drifting down until today they are below pre-tariff levels.
CPA Chief Economist Jeff Ferry explains what happened:
“We’ve seen this with many tariffs. The imposition of the tariff leads to a sudden price increase as consumers, wholesalers, and retailers fear there could be a shortage. But after a few months the market comes to its senses and prices come back to earth. In the case of washing machines, the Korean importers responded by increasing their US-based production, and Whirlpool also increased US production. So we had lots of competition in the US market, and we still do today, and this is giving consumers good deals on washers and dryers.”
According to Ferry, the substantial competition between the US-based producers maintains a healthy US market. Meanwhile, the new jobs, revenue and profit created by the tariffs contribute to US economic growth.
Of course, the spotlight will be shone on 2018 by free traders and others who want to make tariffs look like a bad idea. As recently as August 6, Bloomberg used the same 2018 data points to show that the washing machine tariffs “hit consumers.” What about 2019 and 2020? Tariffs are still in place.
Tariffs work, says Ferry. Just like the earth goes around the sun.