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California Economic Forecast principal weighs in on delayed tariffs

Economist weighs in on Trump tariffs

SANTA BARBARA, Calif. – The principal with the California Economic Forecast said tariffs proposed by President Trump have been delayed for 30 days at the request of Mexico's President.

Even so, Dr. Mark Schniepp, who received his Doctorate in Economics at UCSB, is not forecasting doom and gloom.

"They will not necessarily raise prices on all things coming from Mexico and Canada," said Schniepp. "It really depends on the product and how competitive it is with other industries coming from other places so we can expect some increases in prices, but across the board no you will find a myriad of options occurring."

A tariff is defined as a tax imposed by governments that can produce revenue and regulate trade.

Economists including Schniepp said tariff talk is already impacting the stock market.

"It already has affected the stock market and they don't like it at all because they believe in general that there will be price increases, there will be some damage done to American consumers, but for the most part we really haven't seen a major collapse in stock market," said Schniepp.

Traders and investors appears to be waiting to see how it all unfolds.

"It probably is only going to be very short-term because Trump has said he is using this as a negotiating tool or to get what he wants."

That includes a push back on the flow of drugs such as fentanyl.

President Trump has said he won't place too high a tariff on energy from Canada.

"He is trying to protect prices for any kind of energy commodity."

Schniepp said tariffs won't automatically drive prices higher for everyone.

"That is not likely to be the case, certainly we may see some commodities and some industries go up higher but it really depends on the competitiveness of the industry and where else these products are coming from so it is really going to be a mixed bag of outcomes from the tariffs."

People don't need to panic buy.

"No need to panic, not at all, again, these are likely to be more short-termed, the actually increase in prices that could occur is not likely, is not going to be the full 25 percent because tariffs again are applied to the wholesale or the producer prices, so by the time it gets to the consumer prices that kind of increase is not going to apply."

Schniepp said he wouldn't worry about the price increases because if they do occur they will probably be short-lived.

Recent fires, however, could lead to price hikes as people prepare to rebuild.

"We are likely to see some shortages, perceived shortages occur for construction workers and yes material prices are likely to climb over the next couple of years, it will probably be a slow gradual increase unless building it expected to occur much sooner than we think in other words if they allow the process, they speed it up, then look for higher prices," said Schniepp.

Finding construction labor is likely to be an issue.

Lalo Barajas who operates Rose Cafe Mexican restaurant on Cliff Dr. in Santa Barbara and is rebuilding a home destroyed in the Montecito mudslide 7 years ago said he has already received a bill explaining a surcharge subject to change.

"Just today I found out that I had thought I locked in a price for windows and doors to a house I am rebuilding from the mudflow in Montecito and now I am finding out they are going to charge me 12.5 percent higher," said Barajas.

He is also concerned about his family business that serves up Superbowl favorites all year long.

"That is a big deal you know, Superbowl Sunday chips, guacamole that a big deal so yeah.," said Barajas, "To just think it could go higher is just crazy in this business where the margins for making a profit are already slim."

Barajas said the costs are passed onto customers to make ends meet.

For more information about the California Economic Forecast visit https://californiaforecast.com

Article Topic Follows: Money and Business

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Tracy Lehr

Tracy Lehr is a reporter and the weekend anchor for News Channel 3-12. To learn more about Tracy, click here

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