The cost of tariffs has surged
If the United States cancels China's most favored nation treatment, Chinese exports to the United States will face higher tariff barriers. It is estimated that the average tariff rate on taxable goods imported by the United States from China may soar from the current 19.3% to over 60%, which will greatly increase the cost burden on Chinese export companies.
Consumer price increase
The National Retail Federation (NRF) predicts that canceling most favored nation treatment will result in American consumers paying more for goods such as clothing, toys, and furniture. The increase in tariffs will be directly passed on to consumers, increasing their cost of living.
Rising transportation costs
Since the Trump administration announced new tariffs in 2018, prices in the ocean container shipping market have risen significantly. If the most favored nation treatment is cancelled, the skyrocketing sea freight prices will be borne by China's cross-border e-commerce, and further increases in freight and tariffs will lead to a significant decline in the competitiveness of Chinese goods in the US market!
Increased compliance costs
The Trump administration may strengthen regulation of intellectual property and product quality, which will increase compliance costs for cross-border e-commerce companies. Enterprises need to invest more resources to meet regulatory requirements in the United States, which reduces their market competitiveness.
Decrease in federal revenue
The American Tax Foundation points out that the deadweight losses caused by tariffs are proportional to the square of tariff growth. Therefore, canceling most favored nation treatment and significantly increasing tariffs may lead to a decrease in federal revenue and have a negative impact on the US economy.
GDP and consumer welfare are damaged
A study by the American think tank "American Action Forum" suggests that the new tariffs could increase household costs by up to $2350 per year, resulting in a 3% decrease in median income and a 0.16% to 0.31% decrease in GDP. This will seriously harm the welfare of American consumers and overall economic growth.