Poor U.S. households hit hardest by import taxes, study shows

WASHINGTON Thu Aug 7, 2014 3:26pm EDT

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WASHINGTON (Reuters) - Poor U.S. households are the hardest hit by tariffs on imports that push up the price of goods from fruit to furniture, according to research from the Peterson Institute for International Economics.

Households earning less than $20,000 a year are hit twice as hard as households earning more than $150,000, and almost twice as hard as households earning $100,000 to $150,000.

The biggest squeeze was due to cigarettes and other tobacco products, which have tariffs of close to 90 percent and account for a much higher share of poor households' shopping budget than rich households'. Tariffs on basics like food and clothing also hit low-income earners harder, the research showed.

"The goal is to protect domestic industry and jobs from lower-priced foreign goods," Peterson researcher Tyler Moran wrote in a blog post. "But often forgotten is the impact of the U.S. tariff structure on the wallets of American consumers when they visit shopping malls and have to pay a higher price for the goods they purchase."

For example, tobacco made up 1.3 percent of consumption for the poorest households, on less than $5,000 a year, compared to 0.2 percent for the richest households. Fruit and vegetables, with tariffs of around 10 percent, accounted for 1.9 percent of the poorest households' budgets and 1.1 percent for those earning more than $150,000.

The United States has average tariffs of 3.4 percent, lower than Europe and Japan, and is negotiating trade deals with Pacific countries and the European Union that would cut tariffs further.

The study matched tariff data with the spending habits of various income groups. It assumed that tariffs raise the price of both imports and competing domestic goods.

(Reporting by Krista Hughes; Editing by Leslie Adler)

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