Tariffs don't matter as much as how big they are: Chart of the Week
That new tariffs have been imposed and are on the way is less important than their final shape. The problem is, nobody seems to know what that will be.
Read more: 5 ways to tariff-proof your finances
But there are educated guesses.
Economic observers have tried to give us the best picture of the cost of tariffs based on what the Trump administration has implemented. As of the White House's latest summer trade announcements, the US effective tariff rate has risen to 18%, according to estimates by the Yale Budget Lab.
Reflected in our Chart of the Week, a chart at the center of debate in Washington and on the minds of Wall Street analysts, is the striking increase, with tariffs reaching levels more fitting to the 1930s. And it keeps rising with every White House missive and threat.
The Budget Lab estimates the effects all US tariffs and foreign retaliation through July 9, including the effects of the deal with Vietnam, the 50% tariff on copper, and this week's announcements on new rates for more than 20 countries.
"Another round of tariff escalation is in the making as we reached the expiration week of the 90-day pause," wrote Claudio Irigoyen and Antonio Gabriel, both global economists for Bank of America, in a note on Friday. "These actions come on the back of last week's extension of the US-China deal and the new deal with Vietnam, which might set the tone for the rest by penalizing re-routing of exports."
Read more: What Trump's tariffs mean for the economy and your wallet
With the effective tariff rate well above the norm established for decades, the latest increase highlights the risk of failing to resolve escalating tensions. Should the average tariff settle to lower amounts, businesses will have more flexibility to absorb the costs, pass them on to consumers, or some combination of the two. Which is a key reason why the market hasn't particularly reacted this week. Stocks are still surfing their record highs.
But should this chart continue to trend higher, then those rates could increase stagflationary risks, the Bank of America economists wrote, and limit the policy responses of the Federal Reserve.
"We still think there is room for the announced tariffs to be negotiated down. But even if they are, policy uncertainty could make it harder for the Fed to cut."
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Associated Press
6 minutes ago
- Associated Press
America's only rare earth producer gets a boost from Apple and Pentagon agreements
MP Materials, which runs the only American rare earths mine, announced a new $500 million agreement with tech giant Apple on Tuesday to produce more of the powerful magnets used in iPhones as well as other high-tech products like electric vehicles. This news comes on the heels of last week's announcement that the U.S. Defense Department agreed to invest $400 million in shares of the Las Vegas-based company. That will make the government the largest shareholder in MP Materials and help increase magnet production. Despite their name, the 17 rare earth elements aren't actually rare, but it's hard to find them in a high enough concentration to make a mine worth the investment. They are important ingredients in everything from smartphones and submarines to EVs and fighter jets, and it's those military applications that have made rare earths a key concern in ongoing U.S. trade talks. That's because China dominates the market and imposed new limits on exports after President Donald Trump announced his widespread tariffs. When shipments dried up, the two sides sat down in London. The agreement with Apple will allow MP Materials to further expand its new factory in Texas to use recycled materials to produce the magnets that make iPhones vibrate. The company expects to start producing magnets for GM's electric vehicles later this year and this agreement will let it start producing magnets for Apple in 2027. The Apple agreement represents a tenth of the company's pledge to invest $500 billion domestically during the Trump administration. And although the deal will provide a significant boost for MP Materials, the agreement with the Defense Department may be even more meaningful. Neha Mukherjee, a rare earths analyst with Benchmark Mineral Intelligence, said in a research note that the Pentagon's 10-year promise to guarantee a minimum price for the key elements of neodymium and praseodymium will guarantee stable revenue for MP Minerals and protect it from potential price cuts by Chinese producers that are subsidized by their government. 'This is the kind of long-term commitment needed to reshape global rare earth supply chains,' Mukherjee said. Trump has made it a priority to try to reduce American reliance on China for rare earths. His administration is both helping MP Materials and trying to encourage the development of new mines that would take years to come to fruition. China has agreed to issue some permits for rare earth exports but not for military uses, and much uncertainty remains about their supply. The fear is that the trade war between the world's two biggest economies could lead to a critical shortage of rare earth elements that could disrupt production of a variety of products. MP Materials can't satisfy all of the U.S. demand from its Mountain Pass mine in California's Mojave Desert. The deals by MP Materials come as Beijing and Washington have agreed to walk back on their non-tariff measures: China is to grant export permits for rare earth magnets to the U.S., and the U.S. is easing export controls on chip design software and jet engines. The truce is intended to ease tensions and prevent any catastrophic fall-off in bilateral relations, but is unlikely to address fundamental differences as both governments take steps to reduce dependency on each other. ___ Associated Press reporters David Klepper and Didi Tang contributed to this report from Washington D.C. Michael Liedtke contributed from San Francisco.
Miami Herald
6 minutes ago
- Miami Herald
How the 'Big Beautiful Bill' boosts QSBS benefits for startup employees and founders
How the "Big Beautiful Bill" boosts QSBS benefits for startup employees and founders QSBS benefits got an update in Trump's new budget law. Range shares how that could impact startup founders, investors, and employees. The new GOP budget legislation includes a massive win for startup employees and founders: dramatically expanded Qualified Small Business Stock (QSBS) benefits that could save qualifying investors from paying 28% capital gains taxes on millions of dollars in returns. The changes increase the maximum tax exclusion from $10 million to $15 million while allowing partial benefits after just three years instead of the current five-year minimum. For the tech sector specifically, this represents the most significant expansion of startup investment incentives in over a decade. The Joint Committee on Taxation estimates these changes will provide an additional $17.2 billion in tax benefits over the next decade. What Changes with QSBS Under the GOP Tax and Spending Package The GOP budget legislation restructures Qualified Small Business Stock benefits in three key ways: Reduced Holding Period with Tiered Benefits: Previously, you had to hold QSBS for five years to get any tax exclusion. The new rules create a graduated schedule: 50% exclusion after 3 years (effective tax rate: 14%)75% exclusion after 4 years (effective tax rate: 7%)100% exclusion after 5+ years (tax-free) Higher Exclusion Limits: The maximum tax-free gain increases from $10 million to $15 million (or 10 times your investment, whichever is higher). Both limits will be indexed for inflation starting in 2027. Raises the Maximum Gross Asset Threshold For Companies: The gross asset threshold rises from $50 million to $75 million, meaning more mature startups remain QSBS-eligible longer. How These Changes Amplify the QSBS Tax Exemption The expanded QSBS rules create three fundamental improvements that benefit anyone holding qualifying startup equity: More Companies Qualify for Tax Exclusion The gross asset threshold increase from $50 million to $75 million means companies can maintain QSBS eligibility deeper into their growth cycles. This expansion particularly helps employees at Series B and C companies who previously lost qualification and extends the window for later-stage hires to capture these benefits. Earlier Exit Flexibility with Meaningful Tax Savings The tiered approach transforms QSBS from an all-or-nothing proposition into a graduated benefit system. Rather than losing all tax advantages if you sell before five years, you could capture a 50% exclusion after three years and 75% after four years. This change removes the penalty for circumstances beyond your control, like acquisitions or liquidity needs. Substantially Higher Tax-Free Gains The exclusion cap jumping from $10 million to $15 million means 50% more capital gains could be sheltered from taxes. For high-growth companies where individual equity stakes can reach eight or nine figures, this expansion captures significantly more wealth preservation. Who Might Benefit Most from These Changes These changes can particularly impact several key groups: Serial Entrepreneurs and Angel Investors gain the flexibility to recycle capital between ventures without waiting for arbitrary holding periods, while still capturing substantial tax Employees with Stock Options face less pressure around exercise timing, knowing they'll receive meaningful tax advantages even if their company exits before the traditional five-year Capital and Private Equity professionals can optimize portfolio exits around business fundamentals rather than tax calendars, while still preserving significant tax advantages for their investments. Real-World Example: Million-Dollar Tax Savings Consider this scenario: You exercise $100,000 worth of startup options that grow to $5 million over four years, then your company gets acquired. Under Previous Rules: You'd pay the full 28% QSBS rate on all gains (about $1.37 million in taxes) because you didn't hit the five-year threshold. Under New Rules: You'd get 75% exclusion after four years, paying taxes on only 25% of gains (about $343,000 in taxes)-saving over $1 million. Keeping an Eye on Evolving Tax Legislation With the "Big Beautiful Bill" signed into law, the new exemption structure applies only to QSBS acquired after the enactment date, making timing important for current equity holders considering exercise decisions. This expansion comes at a particularly relevant moment for the tech sector. As artificial intelligence and other emerging technologies drive new startup formation, the enhanced QSBS benefits create stronger incentives for both founding teams and early employees to take entrepreneurial risks. The proposed changes acknowledge that the original $10 million and $50 million thresholds, established in the early 1990s, no longer reflect today's startup economics. This is just one example of how tax policy and financial regulations are constantly in flux. That's one of the reasons why it can be easy to miss out on new wealth strategy opportunities as they emerge. The expanded QSBS tax exemption doesn't require new risk-taking or complex restructuring to make startup equity positions more valuable from a tax perspective, as long as investors know how to time option exercising and stock sales to take advantage of the exclusion. This story was produced by Range and reviewed and distributed by Stacker. © Stacker Media, LLC.
New York Times
11 minutes ago
- New York Times
Rising Inflation Underscores Risks in Trump's New Tariff Threats
President Trump's steep tariffs have started to weigh on consumers' wallets, sending prices higher as the White House readies a more drastic — and potentially costly — expansion of its global trade war. The risks in Mr. Trump's economic strategy began to show on Tuesday, with the release of data that found inflation had accelerated in June. Prices rose noticeably on appliances, clothing and furniture, products that are all heavily exposed to the president's taxes on imports from Canada, China and other major trading partners. The inflation report undercut Mr. Trump's continued assertions that Americans would not face financial repercussions from his increasingly aggressive trade brinkmanship. Since taking office, the president has imposed withering duties on allies and adversaries alike, with additional taxes on a range of products such as cars and steel. The latest reading of the Consumer Price Index recorded the first signs of what economists had predicted all along, with U.S. businesses and consumers shouldering a growing share of the burden from the taxes Mr. Trump has imposed on imports. The data also carried perhaps a new warning for the president as he prepares another round of tariffs on dozens of countries in about two weeks, including a 30 percent tax on the European Union. Some experts said that an uptick in inflation could foreshadow more significant price increases later, especially if Mr. Trump proceeds as planned. 'Up until this report, you could have argued that inflation is on a journey lower,' said Padhraic Garvey, who leads ING's research team for the Americas. 'Now we are on a journey higher.' Want all of The Times? Subscribe.
