Tariffs Bite: Consumers Face Price Hikes Amid Trade Uncertainty

Businesses Warn of Economic Strain as New Levies Take Hold

New tariffs are poised to impact American consumers and businesses, with economists predicting potential inflation and a drag on economic growth. Industry groups are voicing strong concerns that smaller enterprises will bear the brunt of these increased costs.

Uncertainty Lingers Over Key Trade Pacts

As nations finalize their tariff rates, questions remain about the implementation of recent trade agreements. For instance, the United States and Japan are reportedly at odds over crucial details concerning reduced tariffs on Japanese automobiles.

Washington has yet to provide a concrete date for when these lower duties will take effect for Japan, the European Union, and South Korea. Currently, most US auto imports are subject to a 25% duty under a separate sector-specific order.

Consumers Likely to Absorb Costs

Marc Busch, a Georgetown University professor and international trade policy expert, anticipates that US companies will increasingly pass on the cost of these tariffs to consumers. He noted that an earlier 90-day pause allowed importers to build up their stock.

While businesses initially absorbed some of the tariff burden to maintain sales, inventories are now dwindling. Busch indicated that this strategy of absorbing costs is unlikely to continue indefinitely.

“With back-to-school shopping just weeks away, this will matter politically,” stated Busch.

Trade War’s Broader Economic Impact

Economists are divided on the long-term effects of these tariffs on prices. While some experts believe the price increases will be a one-time event, others remain cautious, asserting that the full impact is still undetermined.

The Congressional Budget Office projected in July that tariffs imposed by the Trump administration could reduce real GDP by 0.1% and increase consumer prices by 0.2% annually over the next decade, with higher costs disproportionately affecting lower-income households (Congressional Budget Office, July 2021).