Trump’s Tariffs Are Not Going Well

Much attention has been given to the “TACO” phenomenon, in which President Trump threatens wildly high tariffs on certain countries, then routinely backs off. However, as the New York Times notes today, many new tariffs actually have gone into effect at Trump’s direction. Over the past six months, the president “has steadily and dramatically raised U.S. tariffs, transforming global trade” in the process.

The Budget Lab at Yale updates its estimates of Trump’s second-term tariffs every few days — almost as often as he changes them. As of July 13, the average U.S. tariff rate on imported goods is now 20.6 percent, an increase of 18.2 points from before Trump took office. Even after import patterns shift in response to existing tariffs, the average effective rate will fall only to 19.7 percent, a 17.3 point increase, which is the highest since 1933.

Assuming that existing tariffs stay in effect for ten years, the Budget Lab projects that they will transfer nearly $3 trillion from American consumers and businesses to the federal government’s coffers. They increase consumer prices by 2.1 percent in the short run, costing the typical household almost $2,800 per year. Other delightful macro-effects of Trump’s tariffs, as estimated by Yale’s Budget Lab, are listed below:

• Economic growth in the United States will be 0.9 percent lower in 2025 than it otherwise would have been, absent new tariffs and foreign retaliation. In the long run, the American economy will be persistently 0.5 percent smaller — equivalent to $135 billion in 2024 dollars.
• The unemployment rate will be 0.5 percent higher by the end of 2025, and 641,000 fewer Americans will be employed.
• U.S. exports will be 17.5 percent lower than they otherwise would be.
• Although long-run U.S. manufacturing output will be 2.5 percent greater, advanced manufacturing will actually decline by 2.9 percent as production shifts toward nonadvanced durable goods. The expansion of manufacturing also crowds out other sectors of the economy: Construction will contract by 4.1 percent, agriculture by 0.8 percent, and mining & extraction by 1.5 percent.
• Although tariffs in effect would raise nearly $3 trillion in revenue over ten years, their deleterious economic effects would cost the federal government $487 billion, bringing dynamic revenues down to $2.5 trillion.

Meanwhile, although an overall consumer price increase of 2.1 percent from the tariffs appears modest, the Budget Lab finds that certain consumer staples will see their prices rise by much more:

• “Consumers face high increases in clothing and textile prices in the short-run: prices increase 44 percent for leather products (shoes and hand bags), 40 percent for apparel, and 21 percent for textiles. After substitution and global supply shifts in the long-run, prices remain 20%, 18%, and 11% higher, respectively.”
• “Food prices rise 4.1 percent in the short-run and stay 3.3 percent higher in the long-run. Fresh produce is initially 7.0 percent more expensive while stabilizing at 3.9 percent higher.”
• “Motor vehicle prices rise 14.1 percent in the short-run and 10.3 percent in the long-run, the equivalent of an additional $6,800 and $4,900 respectively to the price of an average 2024 new car.”

Remember, all of these effects are from the tariffs that are already in effect. Yet Trump has promised to impose far more and far worse taxes on trade. If and when they come into effect, the Budget Lab will have estimates for those as well. Worth keeping an eye on.

Various articles from other places describe how American trade policy is prompting the world to try and leave us isolated economically:

• “American Allies Want to Redraw the World’s Trade Map, Minus the U.S.,” from the New York Times: “Facing growing chaos, the European Union and numerous other countries are seeking to forge a global trading nexus that is less vulnerable to American tariffs.”
• “Under Attack by Trump’s Tariffs, Asian Countries Seek Out Better Friends,” also from the Times: “Most nations are still negotiating in hopes of avoiding punitive import taxes. At the same time, they’re looking for trading partners as a way around the United States.”
• “Trump’s Tariffs Push Economies to Broaden Trade Ties,” from Bloomberg: “The European Union is preparing to step up engagement with other countries hit by President Donald Trump’s tariffs following a slew of new threats to the bloc and other US trading partners.”

Here’s a small sample of articles describing the tariffs’ effects on American consumers:

• “The latest tariffs could make your shoes a lot more expensive,” from Axios: “The Yale Budget Lab estimated late Monday that the new tariffs, as imposed, would raise some categories of shoe prices as much as 37% in the short term. Assuming the tariffs stay in effect, over the long run those prices would be 18% higher than they are today.”
• “Tariffs on Brazil Could Leave Coffee Drinkers With a Headache,” from the New York Times: “Trump’s pledge to place a 50 percent tariff on all imports from the South American nation will drive up the prices of coffee — and orange juice.”
• “Levi Strauss limits selection for holiday shopping season due to tariffs,” from Reuters: “Levi Strauss has a simple strategy to deal with U.S. tariffs: stop offering less-popular styles during the holiday shopping season so they can avoid having to offer discounts to move inventory.”

A couple of pieces on the tariffs’ tangible impact on U.S. businesses:

• “Time runs out for nearly century-old Michigan clock company due to tariffs, other factors,” from NBC: “A Michigan clock company that has helped people keep time for 99 years says it’s going out of business due to tariffs and other economic conditions.”
• “‘Chaotic’ tariff regime and trade war are leaving small businesses in their wake,” from CNN: “For Busy Baby owner Beth Fynbo Benike, 2025 was stacking up to be a growth-spurt year for the business she started in 2017. The Army veteran’s baby products company got its foot in the door at Walmart and Target, and she just placed her largest-ever order to replenish inventory for her website and Amazon. That container of goods, however, now will cost her nearly $230,000 to arrive on US soil.”

Finally, a new study for the nearly two-thirds of Americans who are invested in the stock market:

• “Rounding up the Effect of Tariffs on Financial Markets,” from the National Bureau of Economic Research: “We find that a one percentage point higher tariff is associated with a statistically significant 0.23% decline in stock prices. Further, we find no evidence of a dollar appreciation; if anything, higher tariffs are associated with a dollar depreciation.”

When is that “golden age of America” supposed to begin, again?