The Impact of New Tariffs on American Businesses and Consumers
American businesses and consumers are beginning to understand the potential effects of President Donald Trump’s foreign trade agenda as the United States imposes higher tariffs on products from dozens of countries. This move marks a significant shift in U.S. trade policy, with import tax rates reaching levels not seen in nearly 100 years. However, the individual impact on business costs and consumer prices can vary widely depending on the specific goods and the countries involved.
The new tariffs apply to goods from nearly 70 U.S. trading partners, including major economies like the European Union and smaller nations such as Lesotho. A majority of these countries face a 15% tariff, while some Asian countries are subject to a 19% rate. Other nations are hit with tariffs ranging from 20% to 50%. Additionally, a 55% tariff on Chinese-made goods is scheduled to take effect if a U.S.-China trade deal is not reached.
Businesses have been navigating Trump’s fluctuating tariffs since February, with many automakers absorbing the costs for now. However, recent government data shows that retail prices for groceries, furniture, and appliances have started to rise. Economists predict that these tariffs will eventually lead to higher prices for U.S. consumers.
According to the Budget Lab at Yale, the new tariffs could increase prices by 1.8% in the short term, equivalent to a $2,400 loss of income per U.S. household. This projection is based on an analysis of duties implemented this year, including a doubling of the levy on items made in India.
Retailers have so far managed to keep prices stable, but the increased tariffs are expected to significantly raise costs for U.S. retailers, manufacturers, and consumers. Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation, noted that the new tariffs will have a substantial impact.
How We Got Here
Trump introduced sweeping import taxes on goods from 66 countries, the European Union, Taiwan, and the Falkland Islands in April. He claimed these “reciprocal” tariffs were intended to boost domestic manufacturing and restore fairness to global trade. A week later, he paused the country-specific tariffs but applied a 10% tax to most imports. In early July, he began notifying countries that their exports would be subject to higher tariffs unless they reached trade deals. The start date was later pushed to Thursday.
In addition to the country-specific tariffs, Trump announced a 35% tariff on imports from Canada, though action on Mexico was delayed during negotiations. A free trade agreement from Trump’s first term shields most of Canada and Mexico’s products from heavy duties. He also imposed a 50% tariff on goods from Brazil and signed an executive order to double India’s tariff rate on Russian oil purchases.
Other ongoing tariffs include a 50% duty on imported aluminum and steel, and threats of 100% tariffs on computer chips not made in the U.S. The administration has also indicated that tariffs on pharmaceutical drugs are forthcoming.
Tariffs Are Already Impacting Prices
The U.S. Commerce Department reported a 2.6% increase in prices in June, up from 2.4% in May. The Consumer Price Index also rose, with increases in the cost of furniture, toys, and other frequently imported items. Shoppers should expect higher prices for clothes and shoes, as the combined tariffs disproportionately affect clothing and textiles. According to the Budget Lab at Yale, shoe prices could rise 39% temporarily and remain 19% higher, while apparel prices could increase 37% temporarily and stay 18% higher.
Overall, Americans face an average tax of 18.6% on imported products, the highest rate since 1933. Food and drink prices are also expected to climb, particularly for items like bananas, coffee, fish, beer, and liquor. The Tax Foundation estimates that these tariffs will result in higher food prices, as the U.S. does not produce enough of certain products to meet demand.
Wine and Alcoholic Beverages Face Higher Costs
The U.S. Wine Trade Alliance warned that a 15% tariff on European wines and spirits could lead to over 25,000 job losses and nearly $2 billion in lost sales. Wine distributors and retailers avoided price increases by accelerating shipments earlier in the year, but with the EU’s tariff rate raised to 15%, customers may see European wines costing 30% more in September.
Car Prices Hold Steady — So Far
Some automakers have already raised prices to counteract tariffs. Ferrari is waiting for more details on Trump’s trade deal with the EU before adjusting its 10% surcharge on vehicles in the U.S. Most automakers have held off on passing on tariff costs to consumers, but this could change. General Motors expects the impact of the tariffs to become more pronounced in the third quarter, with an estimated cost of $4 billion to $5 billion this year. Toyota reported a 37% drop in profits due to the tariffs, leading to revised earnings forecasts.
A Clouded Picture
Despite the new tariffs, the situation remains fluid. Trump’s use of emergency powers to implement tariffs is being challenged in court, with the case expected to reach the U.S. Supreme Court. Additionally, the tariffs on Chinese goods have not been finalized, and consumers may see more effects when the administration ends a tax exemption for small parcels from other countries.
Trump recently signed an order to suspend the “de minimis” exemption, which allowed shipments valued at $800 or less to enter the U.S. duty-free. This exemption will be eliminated for low-value packages from every country on August 29.