## New Tariffs Poised to Increase Prices for American Consumers This report from **The Washington Post**, authored by **Abha Bhattarai and Jaclyn Peiser**, details the significant impact of the Trump administration's latest round of tariffs on American consumers and businesses. The tariffs, which took effect at midnight on Thursday, have pushed the average U.S. tariff rate to its highest level since the Great Depression, signaling a shift from tentative to permanent trade policy. ### Key Findings and Conclusions: * **Broad Price Increases Expected:** Americans are already paying more for appliances, home furnishings, toys, and shoes, and are likely to face higher prices on a wider range of goods as businesses begin to pass on increased import costs. * **Tariffs as a Permanent Fixture:** The administration's trade policy is now seen as permanent, prompting businesses to adjust their pricing strategies accordingly. As Professor Justin Wolfers of the University of Michigan states, "You’re going to start seeing higher prices as soon as businesses become convinced this will stick around, and that clock starts today." * **Significant Consumer Cost:** Households are estimated to face an average annual cost increase of **$2,400** due to these tariffs, according to the Budget Lab at Yale University. * **Specific Sector Impacts:** * **Clothing and Footwear:** Price increases of **39%** for leather shoes and bags and **37%** for clothing are anticipated. Even after long-term adjustments, prices could remain elevated by nearly **20%**. * **Food:** Food prices could rise by more than **3%**, with fresh produce becoming **7%** more expensive. * **Automobiles:** Cars are expected to become **12%** more expensive, adding an estimated **$6,000** to the price of an average new vehicle. Cars assembled in Japan could see a **9%** increase (**$3,010**), while those assembled in Mexico could face the highest hikes at around **10%** (**$3,550**). * **Business Response:** While businesses initially absorbed tariff costs, this is changing as retailers deplete earlier stockpiles. Companies like Walmart, Nike, and Procter & Gamble are already implementing price increases. Procter & Gamble, for instance, plans to raise prices by approximately **2.5%** on some products to offset **$1 billion** in tariff costs. * **Toy Industry Hit Hard:** The toy industry, which imports over **75%** of its products from China, has been among the first to pass on costs. Toy prices rose **3.2%** between April and June, significantly outpacing overall inflation of **0.4%** during the same period. * **Overall Tariff Rate:** The average effective tariff rate for Americans has reached **18.6%**, the highest since **1933**. At the beginning of the year, this rate was between **2% to 3%**. * **Economic Slowdown Concerns:** Economists are observing slowing economic growth, pullbacks in business spending, hiring, and investment, and households holding back on spending due to the uncertainty. * **Automaker Burden and Shift:** Carmakers like General Motors have absorbed over **$1 billion** in tariff costs, impacting profit margins and prompting some operational shifts. Despite this, the cost of new vehicles in June rose by **1.2%** year-over-year to **$48,907**, which is below the average 10-year increase of **3.9%**. * **Manufacturing Challenges:** For industries like toys, relocating manufacturing from China is deemed unrealistic due to lower labor costs and established infrastructure and expertise. * **Trade Uncertainty:** Businesses face significant uncertainty, with some, like gear manufacturer Gear Motions, unsure of the exact tariff rates they will face on imported components, leading to difficulties in pricing and sales. ### Key Statistics and Metrics: * **Highest Tariff Rate Since:** The Great Depression * **Average Annual Consumer Cost Increase:** $2,400 * **Leather Shoes and Bags Price Increase:** 39% * **Clothing Cost Increase:** 37% * **Long-Run Price Elevation for Clothing/Footwear:** Nearly 20% * **Food Price Increase:** More than 3% * **Fresh Produce Price Increase:** 7% * **Car Price Increase:** 12% (adding $6,000 to average new vehicle price) * **Tariff Rate on Brazil and India:** Up to 50% * **Tariff Rate on European Union and Japan:** 15% * **Procter & Gamble Price Increase:** ~2.5% * **Procter & Gamble Tariff Costs:** $1 billion this year * **Toy Imports from China:** More than 75% * **Toy Price Increase (April-June):** 3.2% * **Overall Inflation (April-June):** 0.4% * **Goods from China Costlier Since First Tariffs:** ~4% * **Projected Cost Increase for Goods from China by Year-End:** ~10% * **Overall Average Effective Tariff Rate:** 18.6% (highest since 1933) * **Average Tariffs at Beginning of Year:** 2% to 3% * **General Motors Tariff Costs (Latest Quarter):** More than $1 billion * **New Vehicle Cost Increase (June Year-over-Year):** 1.2% to $48,907 * **Average 10-Year Increase in Vehicle Cost:** 3.9% * **Price Hike for Cars Assembled in Japan:** 9% ($3,010) * **Price Hike for Cars Assembled in Mexico:** ~10% ($3,550) * **Gear Motions Import Percentage:** 5% * **Gear Motions International Inquiry Decrease:** ~50% ### Notable Risks or Concerns: * **Consumer Affordability:** The significant projected price increases raise concerns about consumer affordability and purchasing power. * **Business Viability:** Small businesses, like Sharon Azula's plush toy and book company, face difficult decisions about whether they can absorb costs or if price increases will deter customers, potentially impacting their ability to continue operations. * **Economic Impact:** Economists warn against the notion that there will be no economic impact, highlighting potential slowdowns in growth, business spending, and hiring. * **Uncertainty in Trade Talks:** Ongoing trade talks, particularly with China, add a layer of uncertainty for businesses. The report underscores that while some dramatic tariff proposals are still under consideration, the current measures are already leading to tangible price increases and economic adjustments across various sectors.
Cars, coffee and clothing are poised to get pricier with new tariffs
Read original at News Source →Americans are paying more for appliances, home furnishings, toys and shoes than they were a few months ago, and they could soon face higher prices on more goods as the Trump administration’s latest round of sharper tariffs kicks in.The newest round of duties took effect at midnight Thursday, lifting the average U.
S. tariff rate to its highest level since the Great Depression. The move solidifies the president’s trade policy after months of negotiations, meaning more manufacturers and retailers are expected to begin raising prices in short order.“Tariffs have moved from being tentative to permanent — and that changes how American businesses are going to respond,” said Justin Wolfers, a professor of public policy and economics at the University of Michigan.
“You’re going to start seeing higher prices as soon as businesses become convinced this will stick around, and that clock starts today.”The higher tariffs, which businesses — not countries — pay to the federal government to import goods, are as high as 50 percent for Brazil and India, but just 15 percent for the European Union and Japan.
For consumers, that escalation is expected to result in higher prices, costing households an average of $2,400 per year, according to estimates from the Budget Lab at Yale University. Americans are likely to face large markups on clothing in the coming months, including a 39 percent increase in prices for leather shoes and bags, and a 37 percent rise in clothing costs, the research center found.
Even after long-run supply chain adjustments and buying shifts, those prices could remain elevated by nearly 20 percent.Food prices, meanwhile, could rise more than 3 percent, while fresh produce could become 7 percent more expensive as a result of the Trump administration’s tariffs, the Budget Lab found.
The center also expects cars — which often rely on components from several different countries — to get 12 percent more expensive, adding $6,000 to the price of an average new vehicle.Although businesses have so far absorbed the brunt of new tariffs, by covering higher costs themselves or relying on earlier stockpiles of inventory to keep them going, that is quickly changing.
Major retailers, including Costco, Williams-Sonoma and Target, that loaded up on products earlier in the year are beginning to deplete those reserves, analysts say.“Consumers are going to pay, starting with their morning coffee,” said Robert Blecker, an economics professor at American University, referring to the 50 percent tariff on coffee from Brazil.
“Although it does seem a lot of firms have been eating some of the tariffs by shaving their profit margins and holding the line on prices, that can’t go on forever.”Walmart, the country’s largest retailer, has begun marking up baby gear, kitchenware and toys. Nike is raising prices on some of its shoes, and many others are beginning to warn consumers that price increases are around the corner.
Procter & Gamble, the maker of Tide laundry detergent, Pampers diapers and Oral-B toothbrushes, said it would start raising prices in August on some products by about 2.5 percent to help offset $1 billion in tariff costs this year.Sharon Azula, who owns a company that sells plush toys and books, had enough inventory to fill orders through much of this year.
But now she is preparing to stock up for the holidays, which means she will have to pay an extra 30 percent on merchandise from China, translating to markups for customers. Adding to the uncertainty: Ongoing trade talks between the U.S. and China.“We know we’re going to have to raise our prices at some point,” said Azula, who founded the Tooth Brigade with her husband in 2019.
“If our $16 plush suddenly costs more than $20, are consumers still going to buy it? We can’t pay for the increase ourselves, but we also don’t know if we can keep moving forward with our business.”The toy industry, which imports more than 75 percent of its products from China, has been among the first to pass on higher costs from the president’s trade war.
Toy prices rose by 3.2 percent between April and June, far outpacing overall inflation of 0.4 percent in that period, federal data shows.The president says higher tariffs are needed to combat other countries’ unfair trade practices, which have hollowed out American manufacturing and cost millions of factory workers their jobs.
By erecting new barriers to foreign products, Trump aims to promote domestic manufacturing while ushering in what he calls a new “Golden Age.”Yet, for products like toys, moving manufacturing out of China is not realistic, said Greg Ahearn, president and chief executive of the Toy Association, a trade group.
Not only is labor cheaper in China, but for decades, the country also has built up an infrastructure of “manufacturing expertise and the ethical manufacturing process at the factories,” he said. Everything from final packaging to materials such as springs, motors and plastic parts “can’t be replicated here in the U.
S.”An analysis of recent prices from the country’s four largest retailers shows that goods from China have gotten roughly 4 percent costlier since the Trump administration’s first tariffs took hold this year, according to Alberto Cavallo, a professor at Harvard Business School and co-director of its Pricing Lab.
He expects those costs to be up about 10 percent by the end of the year.Americans now face an overall average effective tariff rate of 18.6 percent, the highest since 1933, according to calculations from the Budget Lab.“We had 2 to 3 percent average tariffs at the beginning of this year,” said Şebnem Kalemli-Özcan, an economics professor at Brown University.
“It is foolish to think there isn’t going to be any economic impact, or that this is going to be all pink and rosy for the American people.”Economists are just beginning to understand how new trade policies are affecting prices, consumer demand and business decisions across the country. The latest data points to slowing economic growth in the first half of the year, as well as pullbacks in business spending, hiring and investment.
Households, too, are holding tight as they wait to see how things unfold.Still, inflationary effects have so far been limited to specific categories and have yet to translate to higher across-the-board prices for many families. Some of the administration’s most dramatic proposals, including tariffs of 100 percent on chips and semiconductors, and up to 145 percent on Chinese imports, are still in the air.
Carmakers have so far shouldered much of import costs themselves instead of passing them onto consumers. General Motors last month said tariffs had cost the company more than $1 billion in the latest quarter, cutting into its profit margins and prompting the company to move some operations to the United States.
The cost of a new vehicle in June rose 1.2 percent year-over-year to $48,907, below the average 10-year increase of 3.9 percent, according to Kelley Blue Book.But the new round of tariffs is expected to make cars pricier, especially those assembled in Mexico and Japan. Consumers will pay an extra 9 percent, or $3,010, for cars assembled in Japan, including for some Toyota models, such as the Prius and the 4Runner, according to Jonathan Smoke, chief economist at Cox Automotive.
Cars assembled in Mexico will see the highest price hikes — about 10 percent, or $3,550 — according to Cox. Those include the Honda Fit, the Chevrolet Equinox and the Ford Maverick.In Upstate New York, gear manufacturer Gear Motions began raising prices to offset tariffs earlier this year. Although imports make up just 5 percent of the company’s business, trade uncertainty has complicated just about every part of the firm’s operations, President Dean Burrows said.
The company’s gears are used in air compressors, superchargers and car transmissions.Anxious customers are buying less. And it has gotten harder to sell his U.S.-made products overseas; international inquiries have dried up by about 50 percent, he said, as buyers in other countries look for ways to bypass American manufacturers.
“We’re a 140-year-old company and have survived many ups and downs, but the uncertainty right now is what’s unprecedented,” he said. “We have precision gears on the ocean, coming from Italy and I still don’t know whether I’ll have to pay a 15 percent tariff, or 27.5 percent. But either way, we have no choice: We’ll pay it, and we’ll pass it on.
”Julian Mark contributed to this report.
