Imagine furnishing your home with smart appliances, grinders, juicers, and homeware devices connected to your living rooms, bedrooms, or even smart fridge magnets. These everyday products are now deeply affected by the global tariff war, experiencing price hikes and margin squeeze in global trade. Whether sold in stores or through e-commerce platforms, these goods are directly impacted by the tariff war’s consequences on consumer goods.
Since the beginning of the Trump administration after the 2024 elections, Trade War 2024 has become a major battlefield. While geopolitical strategies and international trade negotiations use tariffs as economic weapons, this article explores the hidden IP war and trade tariffs and their impact on the import tax on electronics and other essential daily-use commodities.
What Are Tariffs and How Do They Operate?
In simple terms, tariffs are import taxes imposed on foreign goods. They are charged as a percentage of the price a buyer pays to a foreign seller, and customs and border agencies enforce their collection. In the United States, for example, tariffs on imported goods are collected by Customs and Border Protection (CBP) at 328 ports of entry nationwide. [1]
From a global trade perspective, the tariff imbalance is a critical factor in international trade policies, often leading to a tariff deficit that impacts both importers and exporters.
Understanding Tariff Deficit
A tariff deficit occurs when the cost of imports surpasses the revenue generated by tariffs, leading to economic instability. One example is the ongoing debate between the USA and Canada over electricity tariffs, which directly affects consumer pricing and manufacturing costs.
A study published by Maria Paz Espinosa titled “Understanding Electricity Tariff Deficit and Its Challenges” explains how Spain accumulated an electricity tariff deficit exceeding 30 billion euros by 2012. Although some of this debt was recovered through tariffs, an outstanding 22 billion euros—over 2% of Spanish GDP—remains unpaid. This deficit was initially financed by Spain’s five largest electricity firms, but by 2012, most of their tariff collection rights had been transferred to the Deficit Securitization Fund for the Electricity System (FADE). FADE later issued bonds worth 9.9 billion euros at a consumer cost of 5.617%. [2]
This tariff deficit impact significantly raised consumer electricity bills, affecting home users, manufacturers, and agricultural producers alike. Similar cases can be seen in cross-border trade, where tariff hikes on essential goods drive up costs, not just for luxury products but also for essential commodities such as cars, food, and raw materials.
For example, as per an ING report[3] published on November 27, 2024, the EU tariff rate on cars is 10% compared to 2.5% in the US. Similarly, there is a 3.5 percentage point difference in food and beverage tariffs, favoring Europe. This tariff imbalance significantly impacts US manufacturers, who rely on imported raw materials from EU suppliers.
How Small Products Are Affected by Tariff Hikes
A tariff spike on imported raw materials—whether in the form of technology components, chemicals, or semiconductor chips—inevitably increases the cost of production. This leads to a rise in prices for smart appliances, batteries, car semiconductors, and electronics. As a result, consumers face higher costs when purchasing these items.
From a competitive standpoint, these tariff war consequences on consumer goods make it difficult for higher-cost products to compete with cheaper alternatives from low-tariff regions. This situation increases the risk of contract breaches as importers struggle with margin losses and supply chain disruptions. In extreme cases, margin squeeze in global trade leads to market monopolization, allowing large importers to dominate both the upstream and downstream sectors of the supply chain.
Understanding Margin Squeeze
In short, margin squeeze refers to price compression caused by high tariffs. While it may appear beneficial to consumers at first, in reality, it creates a monopoly situation where only large importers can survive.
When tariffs increase, importers not only absorb higher production and transportation costs but also use their market dominance to push out smaller competitors. This leaves consumers trapped between price hikes and reduced supply, reducing their ability to choose between competing brands.
What Could Happen Next?
From a legal standpoint, the tariff war 2of 024 could introduce complex challenges for importers and exporters, particularly for low-margin products. These difficulties may cause businesses to default on their trade obligations, as rising production costs, increased marketing expenses, and supply chain disruptions make it impossible to maintain profitability.
While some may argue that force majeure clauses could provide relief in cases of unexpected tariff hikes, the legal landscape remains uncertain. Whether tariff fluctuations qualify as force majeure events will be a key topic of debate in the coming years.
Conclusion
As the global tariff war escalates, small commodities and everyday consumer goods will be increasingly affected by import taxes, supply chain disruptions, and price squeezes. The tariff war’s consequences on consumer goods will force businesses and consumers alike to navigate higher costs and reduced competition, making monitoring the evolving economic and legal implications of tariff hikes and trade disputes crucial.
In the long run, businesses must reassess their global trade strategies, ensuring they can withstand tariff fluctuations and maintain their competitive market position in an era of economic uncertainty.
[1] ( AP) //apnews.com/article/economy-import-tariff-fce31b5c5c9f058ff09353c6846b1cf9
[2] Maria Paz Espinosa, in her published article “Understanding electricity Tariff deficit and its challenges
[3] ING Article of 27th November 2024 published by ING
