Tariff impact: Donald Trump's new import duties could push US factory costs up to 4.5%, economists warn; flag risks to jobs, AI growth and margins

Time of India

5 days ago

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As President Donald Trump prepares to implement a sweeping set of new import tariffs starting August 1, a new analysis suggests these policies could significantly strain US manufacturers by raising their costs between 2% and 4.5%.
The research, conducted by the Washington Center for Equitable Growth, warns that such increases may crimp already-thin profit margins, potentially leading to stagnation in wages, layoffs, or even plant closures.
'There's going to be a cash squeeze for a lot of these firms,' said researcher Chris Bangert-Drowns, quoted AP. 'Those seemingly small changes could lead to stagnation of wages, if not layoffs and closures of plants."
Trump has unveiled new trade frameworks with the EU, Japan, the Philippines, Indonesia, and the UK, each featuring import duties ranging from 15% to 50%. The administration argues these tariffs will reduce the budget deficit and bolster domestic manufacturing. 'The 'Made in USA' label is set to resume its global dominance under President Trump,' White House spokesperson Kush Desai said.
However, the new analysis highlights how manufacturers are also bearing the brunt.
'We're getting squeezed from all sides,'' said Justin Johnson, president of Jordan Manufacturing Co. in Michigan, which has seen steel coil prices rise 5–10% despite not using imported steel. Trump's tariffs on foreign steel and aluminium — now at 50% — have allowed US producers to hike prices due to reduced competition, Johnson said, AP reported.
A June survey by the Atlanta Fed found that companies planned to pass half of the new tariff burden onto consumers.
The Labor Department reported a loss of 14,000 US manufacturing jobs following the April tariff rollout.
In Michigan and Wisconsin, more than 1 in 5 jobs are in sectors exposed to Trump's trade duties, including construction, manufacturing, and oil. Even AI investments — which Trump recently promoted as America's economic future — face hurdles, with 20% of electronics inputs reliant on imports.
The Budget Lab at Yale University estimates that households could lose up to $2,400 annually due to the tariffs.
Economist Ernie Tedeschi disputed the Trump administration's claim that inflation is under control, stating that import prices have been accelerating despite contrary conclusions by the Council of Economic Advisers.
Small business owners such as Josh Smith of Montana Knife Co. said the tariffs are affecting expansion plans. Smith paid $77,250 in import duties on a $515,000 German machine he needs for knife production — enough to hire a new worker, he said.
With no American alternative, Smith said tariffs are 'the difference between hiring people and standing still.'
Trump's legal justification for the new tariffs under "emergency" powers is now being challenged in court, even as Treasury Secretary Scott Bessent claimed the global community is 'willing to pay a toll' to maintain access to US markets.
But for small firms like Smith's, the toll may be too steep. 'I want to buy more equipment and hire more people. That's what I want to do,' he said.
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