How Trump's Tariffs Will Impact Consumers

Yahoo

01-04-2025

Trucks coming from Mexico enter the United States to an inspection station after crossing the border in Otay Mesa, California, on April 1, 2025. Credit - Sandy Huffaker—AFP via Getty Images
International trading partners and U.S. consumers alike are watching closely at what President Donald Trump does on April 2, which he has dubbed 'Liberation Day.' That's when the President will announce a sweeping set of reciprocal tariffs—which involve levying taxes on imported goods at the same rate that U.S. exports are taxed.
President Trump has claimed that such tariffs would increase domestic jobs and bring companies back to the country. But his policies could upend existing trade relations and will come at a hefty price for the American consumer.
'This is a prelude to act one of a global trade war. Then, I think we will see the reality as not America first but America alone,' Brown University economics professor Şebnem Kalemli-Özcan told TIME. 'Nobody will want to trade with the U.S. and nobody [will] want to do business with the U.S.'
Typically, the cost incurred by companies hit with tariffs is passed down to the consumer. The price of electronics, for example, will rise by some 10% based on existing tariffs, according to the Budget Lab. Now, everything from apparel to wine is in Trump's crosshairs.
Low-and-middle-income Americans will face the brunt of the tariffs, research shows. Experts say that many families do not have enough financial income to smooth out the shock of the increased prices of goods.
The expected tariffs come after Trump signed a presidential memorandum in February calling for fairness in U.S. trade relationships. 'Gone are the days of America being taken advantage of: this plan will put the American worker first, improve our competitiveness in every area of industry, reduce our trade deficit, and bolster our economic and national security,' the White House fact sheet reads. The trade policies are also part of a broader effort by the Administration to raise funds to counteract the tax breaks given to the wealthiest Americans.
But tariffs alone can't fix the U.S. trade deficit. Kalemli-Özcan says that the tariffs will isolate American companies, making them lose access to foreign innovations and technological advances. Without policies to promote domestic manufacturing, industries would be disrupted. 'Starting a whole industry, [and having] it come up to scale so that you really satisfy demand of all U.S. consumers—that's going to [take] nothing short of a decade,' she says. 'At that point, we are going to have a very sluggish economy because we killed the dynamics of our economy.'
The exact details of the new reciprocal tariffs remain unknown. But there are a few general ways they might hit the average person.
Even before the new tariffs are announced, China, the world's largest trading partner, is facing a 20% tariff, which increased from the initial 10% tariff imposed in early February. On the campaign trail, Trump teased a potential tariff of 60% or higher on all Chinese imports. The Committee for a Responsible Federal Budget U.S. Budget Watch, a nonprofit, estimated such a tax would eventually cause a loss in U.S. revenue as the high tax would likely decrease imports from China by some 85%. China is the largest supplier of goods to the U.S., sending telephones, computers, and electric batteries—meaning the prices of those products will increase.
China has retaliated with a 15% tax on U.S. agricultural products such as chicken and wheat, while soybeans, pork, and fruit will see a 10% tariff. China's government has also blocked a number of U.S. companies from operating in China, the New York Times reported. The actions put the livelihood of farmers at risk as local Chinese suppliers may seek alternatives to the goods imported from U.S. 'This is not something the U.S. holds all the cards in,' Kalemli-Özcan says. Chinese traders can opt to purchase foreign fruit and poultry from other countries, while U.S. farmers may not be able to find other buyers as easily.
Trump, however, indicated that he could decrease tariffs on China as a bargaining chip for the sale of TikTok, which must divest from parent company Byte Dance and find a U.S.-based owner by April 5.
Meanwhile, Mexico and Canada—the two biggest trading partners of the U.S. which have historically been close allies—are facing a 25% tariff on all goods.
The Budget Lab, which modeled the effects of such tariffs, estimates that the cost of fresh produce in U.S. grocery stores will increase by 2.9%. Avocados, about 90% of which come from neighboring Mexico, would certainly increase in price. And prior to the announcement of the 25% auto tariff, the report found that motor vehicle prices for U.S. car buyers could rise by 6.1%.
In the end, consumers and companies will remain in limbo as the Administration continues its fluctuating tariff policy. 'The uncertainties are telling the consumer 'don't consume,' telling the businesses 'cut your investment…do not hire new workers,' because [of] the outlook,' Kalemli-Özcan says. A recession might not come as a direct result of the tariffs, but she predicts a definite 'slowdown in economic growth' from such policies.
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