Take dining tables. Washington put a 10 percent tariff on furniture, along with a host of other consumer products, last September. The U.S. buys roughly half its imported furniture from China. And U.S. furniture retailers hold onto their inventory for three to four months before making a sale.
A sensible retailer would have been worrying about the increased levy long before it was actually raised, but it’s likely their first move was simply to raise the price.
For one thing, retailers generally want to lift prices to the extent competition will allow. For another, U.S. Trade Representative Robert Lighthizer carefully pruned the list of affected product lines to exclude frequently purchased items where higher prices would cause sticker shock, and political opposition, among U.S. consumers. By the same token, furniture retailers can be fairly confident that customers haven’t bought a dining table this decade, so won’t be too sensitive to price movements.
That’s exactly what economists led by Aaron Flaaen of the Federal Reserve found in a paper last month.