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Boston Globe
07-08-2025
- Business
- Boston Globe
‘That's a big tax increase': US businesses and consumers likely to pay most of Trump's tariffs
'Tariff is basically a euphemism for a tax,' said Boston College economist Brian Bethune, who equated it to state sales taxes. 'It's no different than any other tax on . . . products and services.' Advertisement The reality stands in stark contrast with Republicans' recent sweeping, party-line legislation, which they have touted for extending the 2017 tax cuts and adding several new breaks. But while a tariff acts the same as a tax economically, it doesn't carry the same negative baggage politically — at least not yet. Get Starting Point A guide through the most important stories of the morning, delivered Monday through Friday. Enter Email Sign Up Trump has frequently incorrectly asserted that foreign countries, such as China, pay the tariffs. And he along with fellow Republicans have touted the tariff revenue as a financial windfall that helped produce Advertisement 'Working people need relief now. They've earned it,' In his wording, Hawley tacitly acknowledged that at least some of the tariff revenue was paid by consumers. Democrats are trying to hammer home that point directly, referring to Trump's tariffs as taxes that are increasing costs for a wide variety of goods. 'Let's be very clear: This misguided move will raise prices on everyday goods like food, clothing and housing, at a time when families are already struggling with high costs,' New Hampshire Democratic Senator Jeanne Shaheen said in a statement Thursday that referred to 'sweeping Trump tariff taxes.' 'President Trump's tariffs will squeeze small businesses and force many to close their doors, harm our standing in global markets and result in job loss across this country.' Representative Gabe Amo, a Rhode Island Democrat, said his party needs to continually refute Trump's assertions that foreigners pay tariffs. 'It's bringing in a ton of revenue, but from whom?' Amo said. 'This is essentially . . . one of the biggest tax hikes on the American people in history, and Congress didn't sign off on it at all.' After household $2,400 this year. Advertisement Some foreign companies might eat part of the tariff cost to keep US customers, but economists said most of the costs will be borne by US businesses and consumers. Tariffs have brought in about $125 billion since Trump took office, and with the new, higher rates, probably will generate more than $300 billion a year, said economist Douglas Holtz-Eakin, president of the conservative-leaning American Action Forum think tank. 'That's a big tax increase,' said Holtz-Eakin, who was director of domestic and economic policy for Republican John McCain's 2008 presidential campaign. 'It's going to show up as higher prices or slower employment growth, or both, and Americans will pay for it one way or another.' He said Trump's assertions about who pays the tariffs are 'flatly wrong.' 'They're saying the money is pouring in. That's just not true,' Holtz-Eakin said. 'The taxes are remitted by the importer. They write the checks.' Treasury Secretary Scott Bessent said Thursday that the Trump administration is 'trying to rebalance trade in America's favor' by using tariffs to force businesses to manufacture more products in the United States. But when pressed on MSNBC's 'Morning Joe' about who actually pays the tariffs, Bessent acknowledged the US importer writes the check. 'Yes, and then, you know, the importer can pass it on or not,' Bessent said. Some businesses might decide to pass on only a portion of those costs to avoid raising prices too much, Bethune said. But that will cause a hit to their profits. Last week, noted that Advertisement 'Ultimately, they're going to find a way to pass that on to their customers,' Bethune said. Amo noted that a survey released in June of nearly White House spokesperson Kush Desai dismissed 'doom-and-gloom predictions of inflation and recession' from the tariffs. 'The administration has consistently maintained the cost of tariffs will be paid by foreign exporters who rely on access to the American economy, the world's best and biggest consumer market,' he said. But lower-income Americans are poised to take a big hit from the tariffs because they tend to shop at places such as Walmart and Costco that rely heavily on imported clothing and other goods, Bethune said. 'Given the discounted outlets typically source a disproportionate share of their products from places like China, then obviously that's going to have a differential impact there,' he said. Advertisement Taxes on what people buy are considered less progressive than income taxes because people with lower incomes spend a greater percentage of their money on day-to-day purchases. Trump has suggested tariffs could one day bring in enough money to eliminate the federal income tax. As a simply policy question, Holtz-Eakin, the head of the conservative-leaning think tank, said he opposes the idea because the tariffs are 'very regressive.' But he predicted there was no chance tariffs would replace the income tax because they would have to generate seven times the estimated revenue this year, which would require an unrealistic tariff rate of about 140 percent. But Trump still talks fondly about 'Oh to be president in 1890,' Holtz-Eakin said. 'That's what he's dreaming of.' Jim Puzzanghera can be reached at
NDTV
12-07-2025
- Business
- NDTV
Donald Trump Unleashes Tariff Fury: What Unfolded This Week
President Donald Trump has announced a sweeping new tariff policy, imposing a 10% levy on all imports and additional "reciprocal" tariffs targeting countries with significant trade surpluses with the US. These measures have raised concerns about potential inflation, strained international relations, and impacts on American consumers and businesses. What Happened This Week On July 10, 2025, President Trump declared a national economic emergency to implement new tariffs without congressional approval. The policy includes a universal 10% tariff on all imports and higher rates on specific goods from countries like China, Mexico, and Brazil. For instance, a proposed 50% tariff on Brazilian products such as coffee and orange juice could significantly increase prices for US consumers. Why This Matters These tariffs are part of Trump's strategy to reduce the US trade deficit, bring back manufacturing jobs, and generate revenue to fund tax cuts. However, economists warn that such measures could lead to higher consumer prices, supply chain disruptions, and potential retaliation from trade partners. The European Union and China have already indicated plans to impose counter-tariffs on US goods. Breaking Down Trump's Proposal According to Reuters, Trump has proposed a sweeping trade plan that includes a universal 10% tariff on all imported goods. He also advocates for reciprocal tariffs, meaning the US would match or exceed tariffs imposed by other countries on American exports. Additionally, Trump is targeting specific materials like copper, proposing higher duties that could impact key industries such as automotive manufacturing and construction. These measures aim to protect U.S. businesses and reduce trade imbalances. Impact on Consumers and Businesses Will consumers pay more? Yes. The American Action Forum estimates that a 10% tariff on all imports could increase household costs by $1,700 to $2,350 annually, according to NBC News. Any fines on retailers and importers? According Business Insider, While there are no direct fines, importers bear the cost of tariffs, which often leads to higher prices for consumers. Companies like Nike and Walmart have already indicated price increases due to these tariffs. What are allies saying, and are they preparing countermeasures? Yes. The European Union and China have expressed strong opposition and are preparing retaliatory tariffs on US goods, potentially escalating into a trade war. According to CNBC, As the situation develops, the global economic landscape faces increased uncertainty, with potential repercussions for international trade and domestic markets.
CNN
08-07-2025
- Business
- CNN
Inflation is tame. Markets are at record highs. But economists warn Trump is still playing with fire on tariffs
US stocks have rocketed back to all-time highs. The unemployment rate remains historically low. And the inflation rate is lower than when President Donald Trump took office. These developments could embolden the White House to play hardball on trade, taking a tougher stance in negotiations with other nations and threatening sky-high tariff rates. But those positive milestones might have a negative side effect: lulling Trump officials into believing the economy is safe from harm fueled by the president's trade war. Many economists and trade experts worry the damage from the trade war has not been canceled; it just hasn't arrived yet. They fear that overdoing tariffs and prolonging the uncertainty will only make matters worse. 'No one should be lulled into complacency,' Douglas Holtz-Eakin, president of center-right think tank American Action Forum, told CNN in a phone interview. 'There is no way you can avoid these price pressures. The tariffs are real. It will show up. The only question is how fast and where. That story has yet to play out.' And it's a moving target because the tariff rates and deadlines are in an almost constant state of change. Under Trump, tariffs have been announced, delayed, dialed back and revived seemingly at random. In the latest twist, Trump unnerved investors on Monday by announcing double-digit tariff rates on Japan, South Korea and a handful of other countries. However, the new tariffs don't kick in until August 1, extending the uncertainty that investors and CEOs despise. The market reaction Monday may have been more negative if not for Trump's history of walking back his most extreme proposals. Wall Street traders have even coined a phrase for this pattern, calling it the TACO trade, short for Trump Always Chickens Out. Therein lies the challenge: It's incredibly difficult to measure the tariffs' impact, given the extensive lags between when they're announced and when they actually hit the US economy. It can take weeks or months for tariffs to filter through the system, going from manufacturers to wholesalers to retailers and ultimately American consumers. Stores knew tariffs were coming, so many tried to beat the clock by importing inventory before tariffs kicked in. That means many items on store shelves this spring and early summer were still priced at those low pre-tariff levels. In a reflection of that trend, the consumer price index (CPI) rose 2.4% in May, down from 3% in January when Trump took office. But eventually that pre-tariff inventory will run out, raising the risk that price hikes are still on the way. 'If people think just because we got away with two months and it's all good, that's a mistake,' said Holtz-Eakin, a former economic adviser to President George W. Bush and director of the nonpartisan Congressional Budget Office. As Federal Reserve Chairman Jerome Powell has noted, some goods exposed to tariffs have experienced significant price increases, including appliances, toys, computers and other electronics. Yet those price hikes have been masked by price drops elsewhere, including on gasoline. 'It looks like all the numbers are coming in their favor, but you can't just put all this price pressure into the system and expect it will disappear. It can't,' said Mary Lovely, a senior fellow at the Peterson Institute for International Economics. David Kelly, chief global strategist at JPMorgan Asset Management, agreed that tariffs will eventually feed through — even though they haven't yet in a big way. 'We should be careful. Complacency could come from delayed reaction. That's the danger of delayed reactions,' Kelly said. The JPMorgan executive compared it to a toddler who falls on the pavement and doesn't immediately start crying. It doesn't necessarily mean injury was avoided; the reaction may just be delayed. 'The economy is OK, but it's losing some momentum here. And I think the tariff uncertainty is very real,' Kelly said. Of course, it's almost impossible to forecast precisely how this will play out. There is no playbook for how a modern economy reacts to on-again, off-again tariffs at the scale Trump has proposed. The matter is complicated by the 2022 inflation crisis — the worst in 40 years — and the psychological scars from that episode. Investors, small business owners and consumers are more sensitive to price hikes than during Trump's first term. Wall Street cranked up the pressure on the White House after those April 2 tariffs shocked many, coming in higher than even the worst-case scenarios. After bond and stock markets freaked out by pricing in an imminent global recession, Trump blinked. He paused the tariffs for 90 days to allow time to negotiate. That delay set the stage for an epic market recovery, with US stocks recouping all of their steep losses in lightning speed. In the eyes of investors, tariffs went from a clear-and-present danger to merely background noise. 'My feeling is the administration will feel somewhat empowered to play hardball because the stock market is at an all-time high,' said Keith Lerner, co-chief investment officer and chief market strategist at Truist Wealth. US markets finished at record highs on Thursday after the Bureau of Labor Statistics reported the economy added a better-than-expected 147,000 jobs in June. The unemployment rate unexpectedly ticked down to 4.1%. However, beneath the surface of that June jobs report, there were some concerning signals about the state of the labor market. For instance, job growth was concentrated in a limited number of sectors, not widespread as jobseekers and economists would prefer. And the unemployment rate fell in part because the number of jobseekers fell, a trend that Morgan Stanley said reflects a 'chilling effect' from the Trump administration's immigration crackdown. 'I worry more about a recession and unemployment rising than inflation,' said Kristina Hooper, chief market strategist at Man Group, the world's largest listed hedge fund. Hooper said that while tariff-driven inflation is on the way, it will likely be short-lived. On the other hand, policy uncertainty linked to trade can depress business investment in the medium term. 'There seems to be something of a perfect storm pressuring many households,' Hooper said, referring to price increases and student loan payments resuming. That's why Hooper urged the Trump administration to get trade deals done 'quickly' to give businesses clarity on the rules of the road. 'In that kind of environment,' Hooper said, 'all you need is a modest increase in unemployment to tip an economy into much slower growth – and potentially a recessionary environment.'
CNN
08-07-2025
- Business
- CNN
Inflation is tame. Markets are at record highs. But economists warn Trump is still playing with fire on tariffs
US stocks have rocketed back to all-time highs. The unemployment rate remains historically low. And the inflation rate is lower than when President Donald Trump took office. These developments could embolden the White House to play hardball on trade, taking a tougher stance in negotiations with other nations and threatening sky-high tariff rates. But those positive milestones might have a negative side effect: lulling Trump officials into believing the economy is safe from harm fueled by the president's trade war. Many economists and trade experts worry the damage from the trade war has not been canceled; it just hasn't arrived yet. They fear that overdoing tariffs and prolonging the uncertainty will only make matters worse. 'No one should be lulled into complacency,' Douglas Holtz-Eakin, president of center-right think tank American Action Forum, told CNN in a phone interview. 'There is no way you can avoid these price pressures. The tariffs are real. It will show up. The only question is how fast and where. That story has yet to play out.' And it's a moving target because the tariff rates and deadlines are in an almost constant state of change. Under Trump, tariffs have been announced, delayed, dialed back and revived seemingly at random. In the latest twist, Trump unnerved investors on Monday by announcing double-digit tariff rates on Japan, South Korea and a handful of other countries. However, the new tariffs don't kick in until August 1, extending the uncertainty that investors and CEOs despise. The market reaction Monday may have been more negative if not for Trump's history of walking back his most extreme proposals. Wall Street traders have even coined a phrase for this pattern, calling it the TACO trade, short for Trump Always Chickens Out. Therein lies the challenge: It's incredibly difficult to measure the tariffs' impact, given the extensive lags between when they're announced and when they actually hit the US economy. It can take weeks or months for tariffs to filter through the system, going from manufacturers to wholesalers to retailers and ultimately American consumers. Stores knew tariffs were coming, so many tried to beat the clock by importing inventory before tariffs kicked in. That means many items on store shelves this spring and early summer were still priced at those low pre-tariff levels. In a reflection of that trend, the consumer price index (CPI) rose 2.4% in May, down from 3% in January when Trump took office. But eventually that pre-tariff inventory will run out, raising the risk that price hikes are still on the way. 'If people think just because we got away with two months and it's all good, that's a mistake,' said Holtz-Eakin, a former economic adviser to President George W. Bush and director of the nonpartisan Congressional Budget Office. As Federal Reserve Chairman Jerome Powell has noted, some goods exposed to tariffs have experienced significant price increases, including appliances, toys, computers and other electronics. Yet those price hikes have been masked by price drops elsewhere, including on gasoline. 'It looks like all the numbers are coming in their favor, but you can't just put all this price pressure into the system and expect it will disappear. It can't,' said Mary Lovely, a senior fellow at the Peterson Institute for International Economics. David Kelly, chief global strategist at JPMorgan Asset Management, agreed that tariffs will eventually feed through — even though they haven't yet in a big way. 'We should be careful. Complacency could come from delayed reaction. That's the danger of delayed reactions,' Kelly said. The JPMorgan executive compared it to a toddler who falls on the pavement and doesn't immediately start crying. It doesn't necessarily mean injury was avoided; the reaction may just be delayed. 'The economy is OK, but it's losing some momentum here. And I think the tariff uncertainty is very real,' Kelly said. Of course, it's almost impossible to forecast precisely how this will play out. There is no playbook for how a modern economy reacts to on-again, off-again tariffs at the scale Trump has proposed. The matter is complicated by the 2022 inflation crisis — the worst in 40 years — and the psychological scars from that episode. Investors, small business owners and consumers are more sensitive to price hikes than during Trump's first term. Wall Street cranked up the pressure on the White House after those April 2 tariffs shocked many, coming in higher than even the worst-case scenarios. After bond and stock markets freaked out by pricing in an imminent global recession, Trump blinked. He paused the tariffs for 90 days to allow time to negotiate. That delay set the stage for an epic market recovery, with US stocks recouping all of their steep losses in lightning speed. In the eyes of investors, tariffs went from a clear-and-present danger to merely background noise. 'My feeling is the administration will feel somewhat empowered to play hardball because the stock market is at an all-time high,' said Keith Lerner, co-chief investment officer and chief market strategist at Truist Wealth. US markets finished at record highs on Thursday after the Bureau of Labor Statistics reported the economy added a better-than-expected 147,000 jobs in June. The unemployment rate unexpectedly ticked down to 4.1%. However, beneath the surface of that June jobs report, there were some concerning signals about the state of the labor market. For instance, job growth was concentrated in a limited number of sectors, not widespread as jobseekers and economists would prefer. And the unemployment rate fell in part because the number of jobseekers fell, a trend that Morgan Stanley said reflects a 'chilling effect' from the Trump administration's immigration crackdown. 'I worry more about a recession and unemployment rising than inflation,' said Kristina Hooper, chief market strategist at Man Group, the world's largest listed hedge fund. Hooper said that while tariff-driven inflation is on the way, it will likely be short-lived. On the other hand, policy uncertainty linked to trade can depress business investment in the medium term. 'There seems to be something of a perfect storm pressuring many households,' Hooper said, referring to price increases and student loan payments resuming. That's why Hooper urged the Trump administration to get trade deals done 'quickly' to give businesses clarity on the rules of the road. 'In that kind of environment,' Hooper said, 'all you need is a modest increase in unemployment to tip an economy into much slower growth – and potentially a recessionary environment.'
Yomiuri Shimbun
06-07-2025
- Business
- Yomiuri Shimbun
Trump's Economy Remains Pretty Strong, but Some Warning Signs Are Flashing
Nearly six months into his second term, President Donald Trump has imposed global tariffs, orchestrated a crackdown on immigration and pushed a sweeping tax-cut bill through Congress – moves that could significantly alter the U.S. economy, but haven't yet. The country's economy has remained relatively stable and upbeat under Trump, according to many metrics, although economists caution that they see potential warning signs ahead. Stock markets have rallied, the inflation rate is steady and unemployment remains low, ticking down to 4.1 percent in June. Trump's One Big Beautiful Bill promises to extend massive tax cuts, and benefit corporations and wealthier Americans – provisions that could boost parts of the economy. The White House takes credit for the good signs in the economy, saying they are 'laying the groundwork for a long-term restoration of American Greatness. President Trump's 'America First' agenda of tariffs, deregulation, energy abundance, and tax cuts – such as those in the One Big Beautiful Bill – unleashed a historic economy during his first term,' White House spokesman Kush Desai said in a statement. Still, many analysts say that the future of the U.S. economy under Trump remains uncertain. Gross domestic product shrank in the first quarter of the year in part because of surging imports, and consumers are feeling hesitant and spending less. It's also too soon to know the full effect of Trump's widespread tariffs, especially with a deadline approaching to get deals completed with many countries before levies rise once more. And as immigrants leave the workforce, either voluntarily or by deportation, a lack of workers could create labor shortages in certain key areas and fuel wage inflation. Several economists expressed concern that things do not look as rosy as they did at the end of last year. 'We've taken an economy that was growing above trend, and it's now sort of shifting sideways,' said Douglas Holtz-Eakin, who was chief economist for President George W. Bush's Council of Economic Advisers and is president of the American Action Forum, a conservative-leaning think tank. 'It's not bad news yet, but it's not good news.' Trump won office in large part by pledging to bring prices down for Americans, promising to 'end inflation and make America affordable again.' The inflation rate has shown signs of stability during the president's second term – it has remained mild despite the tariff fluctuations, rising just 2.4 percent in May in the consumer price index. That's the lowest it's been since 2021. 'I'm pretty bullish right now on the economy. I think it's hard to see any negative sides,' said Stephen Moore, a former senior economic adviser for Trump. 'I do believe what really happened was that there was fear and fury over the tariffs when they came out. Once Trump started making trade deals to get other countries to lower their tariffs, the economy and stock market turned around on a dime.' Still, the Federal Reserve does not think the economy has escaped inflation and opted to forgo an interest-rate cut at its last meeting. Chair Jerome H. Powell has said the central bank remains in a 'wait-and-see' mode as it continues to gauge the outcome of Trump's trade war and other policies, a delay Trump has criticized. The U.S. labor market also continues to show signs of resilience, adding 147,000 jobs in June. Hourly wages outpaced inflation, and layoffs remain low. But businesses have added jobs at a slower pace this year compared with last year, and hiring has fallen to a standstill in many industries. Economists are keeping a close eye for signs that tariff policies, federal government job cuts and a crackdown on immigration could trigger widespread job losses. Diane Swonk, chief economist at accounting giant KPMG, said the 'margin of error in the labor market is small.' 'I'm worried about the headwinds that are building,' Swonk said, pointing to upcoming potential tariff rate increases. Despite uncertainty around changing tariff policies, the financial markets have rebounded from a worrisome sell-off in April. Trump faced a financial market backlash when he imposed sweeping, double-digit tariffs on nearly every country in the world. Major stock markets plummeted on the news, as economists predicted prices would surge and shoppers would see shortages. And the bond markets flashed warning signs. But as Trump backed off most of the higher tariffs he first announced, the major financial markets recovered the ground they lost and were especially reassured once the White House opened talks with China, the nation's second-largest trading partner. The bond markets have also settled down. The big question fueling uncertainty is what happens with tariff policies going forward. Trump imposed a round of 'reciprocal' tariffs on dozens of countries earlier this year. Those are paused while talks are ongoing. But Trump and trade officials have warned they could resume on or after July 9 if U.S. leaders feel countries are not negotiating in good faith. On Thursday, Trump warned that some of those tariff hikes could be coming. 'If he were to reinstate the Liberation Day tariffs, we would have a recession in the second half almost for sure,' Holtz-Eakin said. The tariff rates imposed this year are already showing up in economic data. GDP, the sum of goods and services in the economy, fell at an annualized rate of 0.5 percent in the first quarter of the year, in part because imports increased significantly as companies front-loaded their inventories in anticipation of tariffs. That was slightly offset by an increase in investment. Cracks have also appeared in other parts of the economy as consumers are feeling wary, which can dictate how much people spend, which fuels close to 70 percent of the economy. A closely watched metric of economic outlook shows that Americans' feelings about the economy have been falling for much of this year, dropping for four months before flattening in May. Consumer sentiment edged up in June, as tariffs remained paused and markets rallied, but the benchmark remains lower than it was in all of 2024. That sentiment is starting to show up in how people open their wallets. Consumer spending dropped in May, after growing at a slower rate in April, as people pulled back spending on cars and eating in restaurants. Also, international tourism to the United States has fallen significantly, with Trump's aggressive rhetoric and policies turning travelers away, particularly from neighboring Canada, which is starting to affect leisure and hospitality sectors that depend on international tourists. Separately, economists are worried that Trump's massive deportation effort could start driving worker shortages, which can fuel inflation, as employers are forced to pay higher wages to attract workers. During his campaign, Trump had accused undocumented immigrants of taking American jobs, adding at one rally, 'we are going to save you.' Economists at Washington think tanks expect Trump's immigration policies to drive immigration close to zero in 2025. Already, the immigration slowdown is shrinking the labor supply and could push up inflation by the end of the year in industries such as agriculture, construction and hospitality, Federal Reserve governor Adriana Kugler said in a speech last month. The Trump administration expects the tax and spending bill that Congress passed Thursday to give the economy a boost. The package will extend significant tax cuts enacted during Trump's first term. It would also make permanent some corporate tax cuts and sweeten tax breaks on some corporate investments – moves that companies have said will make it more enticing to pour their investment funds into U.S. markets. But it would also add trillions of dollars to federal deficits and cut health care benefits for millions of poorer Americans. White House leaders say they are confident about the legislation's approach: 'Critics should get ready for another historic economy in President Trump's second term,' Desai said. Economists are still waiting for the full effects of Trump's tariff, immigration and other policies to show up in economic data, and say that much hinges on what happens with tariff rates in coming months. 'Nothing has been a catastrophe so far, but there's clear signs of slowing in the economy,' said Michael Pearce, deputy chief U.S. economist at Oxford Economics.
