Tracking the transmission process of tariffs: Where does the wool fall on?

CITIC SEC released a research report stating that the Trump administration's tariff measures have been in effect for several months. The bank believes that American importers should be the main bearers of the tariff increases in US cross-border trade. Chinese exporters may currently bear around 12% of the tariff increase, with clothing exporters possibly bearing the burden at a faster pace. In the future, most of the price increases in cross-border trade may still need to be borne by American buyers. CITIC SEC's main points are as follows: The transmission of tariffs is an important and complex issue The bank calculated that if the tariffs threatened by Trump on July 7th and 9th were realized, the overall effective tariff rate in the US would rise to about 15.8%. The transmission process of tariffs is closely related to the resilience of the US economy and the outlook for inflation, and involves the bargaining power and interaction between non-US exporters, US companies, and US consumers. The bank hopes to use existing data to more finely assess the economic impact of tariffs. American importers should be the main bearers of the tariff increases in US cross-border trade The bank estimated that Chinese exporters may currently bear around 12% of the tariff increase, with clothing exporters possibly bearing the burden at a faster pace. American jewelry and aircraft importers have weaker bargaining power, and Japanese car companies seem to be actively absorbing tariffs through a "maintain price, maintain volume" strategy. Many Chinese export companies have thin profit margins, so their ability to absorb price pressure from tariffs is limited, meaning that most price increases in cross-border trade in the future may still need to be borne by American buyers. American companies have the willingness and ability to pass on tariff costs to US residents Existing studies indicate that during Trump's first term, although American importers almost bore all of the tariff increases when trading with non-US exporters, the significant increase in import costs did not lead to a large increase in retail prices. However, with the broader scope of tariffs implemented by the White House this year, and with most trading partners likely facing at least 10% baseline tariffs after August, US companies are finding it difficult to stabilize retail prices by sacrificing their own profit margins. The bank estimates that if US retailers fully absorb the tariff increases imposed by the White House this year, their profit margins would average a decrease of about 1.8%, and industries with thin profits such as comprehensive retail, clothing, and furniture may struggle to absorb this decrease. American companies have indeed expressed their willingness and ability to pass on tariff costs to downstream sectors in two surveys from local federal reserves. The bank still expects that American companies will be able to pass on most of the tariff costs to residents this year. The prices of high-import-content American consumer goods seem to have shown the impact of tariffs The bank matched over 60,000 sets of US import data to three detailed input-output tables in order to calculate the "import content" of each PCE sub-item in the US and to create three indexes tracking the prices of sensitive imported retail consumer goods. Based on this, the bank believes that tariffs may have already began to slightly impact the prices of sensitive imported consumer goods in the US, with consumer goods with a higher "Chinese content" seeming to have started to mildly increase in price after the implementation of the so-called "fentanyl tariff", while consumer goods mainly originating from other non-US trade partners such as Europe and Japan have not yet seen price increases due to the implementation of the "baseline tariff," with US retailers possibly absorbing the cost of tariffs. Whether the "age of calm inflation" in the US can be maintained after the implementation of White House tariffs remains to be seen, depending on whether US companies are willing to continue to "shoulder the burden." The bank still believes that there are concerns about a rebound in US inflation in the second half of this year, which may limit the attractiveness of US bonds as an investment. Risk factors: Policy changes exceed expectations; the accuracy, robustness, and comprehensiveness of quantitative calculations and assumptions are lower than expected; the transmission effects of tariffs are weaker than expected.