Trump's tariff war on the world is making the Americans pay the price too

Business Standard

2 days ago

Since returning to the White House, US President Trump has launched a wave of new import tariffs under a 'reciprocal' trade policy. Starting April 2, broad duties were imposed on many countries, though some were later revised through bilateral deals.
New tariffs on sectors like autos and steel have pushed the average effective tariff rate to 18.4 per cent, the highest since the 1930s, according to a study by Yale's Budget Lab. These duties are levied by US importers and passed on to consumers.
How much are US households paying due to tariffs?
The new study by Yale University has estimated that Trump's tariff regime will result in an average income loss of $2,400 per household in the short term. The burden is unevenly distributed. While low-income families could lose up to $1,300, wealthier households may see a higher nominal hit (around $5,000) but with less impact on their financial stability, the report said.
Price increases are already visible. Leather goods could become 40 per cent more expensive, clothing by 38 per cent, and textile products by 19 per cent. Food prices are expected to rise by 3.4 per cent on average, with fresh produce jumping up to 7 per cent. Vehicle prices could increase by 12.3 per cent, adding nearly $6,000 to the cost of a new car, the Yale report mentioned.
Are prices in the US already rising?
US consumer inflation stood at 2.7 per cent in June, up from 2.4 per cent in May. Economists say stockpiling earlier in the year helped buffer price hikes temporarily. But recent data shows a clear rise in prices of tariff-affected goods like appliances, books, toys, and computers.
Harvard's Pricing Lab found that prices for imports and related domestic goods are rising faster than those for unaffected items, indicating that tariff costs are now feeding into broader inflation.
What's gotten pricier in the US under Trump?
Groceries and food: Key imported staples such as coffee, tea, bananas, avocados, seafood (like shrimp and salmon), and packaged ingredients for snacks/ processed foods have become more expensive, according to a CNBC report. Food costs overall are up 3.4 per cent in the short run, with fresh produce prices rising up to 6.9 per cent initially before stabilising 3.6 per cent higher than before the tariffs.
Electronics and appliances: Items like iPhones (mostly manufactured in China) are potentially up by 30-40 per cent in price, with power tools, washing machines, dryers, televisions, and home electronics all costlier as a result of tariffs on imported components.
Cars: Both imported vehicles and US-manufactured cars (which rely on foreign parts) have seen price hikes. Cars could cost 11-12 per cent more on average, translating to $3,000–$5,900 extra for a new vehicle.
Toys and household items: Products such as Barbie dolls, toys, leggings, and even luxury goods like handbags are now notably pricier (up to 43 per cent for some toys).
Furniture, lumber, drywall: Much imported from Asia, these building and home items are also seeing substantial increases in price.
What are the economic impacts on the US economy?
The Yale study warned that if current tariffs persist, US GDP growth could fall by 0.5 percentage points in 2025-26, with an estimated 500,000 job losses by the end of this year. Unemployment is projected to rise by 0.3 percentage points.
JP Morgan's analysis echoes these concerns, highlighting that tariffs are stoking inflation and reducing consumer demand. While they generate revenue ($28 billion in June 2025 alone, triple the monthly average of 2024), the Congressional Budget Office (CBO) estimates that revenue gains will be more than offset by losses from tax cuts.
Is the trade deficit shrinking as intended?
Despite the Trump administration's stated goal of narrowing the trade deficit, the opposite trend has emerged. US companies have been importing goods in bulk ahead of tariff enforcement, leading to a spike in imports. Exports have shown only modest gains, according to the US Census Bureau data.
The goods trade deficit hit a record $162 billion in March 2025 before dropping to $86 billion in June, according to data from the US Census Bureau. Economists suggest that underlying structural imbalances, such as the US consuming more than it produces, play a larger role in the deficit than foreign trade practices.
With multiple academic studies now highlighting the economic strain of Trump's tariffs on its own citizens, the long-term viability of Trump's protectionist approach remains under scrutiny, both at home and abroad.