Everyone has an opinion about President Trump's tariffs scheduled to take effect tomorrow but the people who think about money for a living — economists in other words — are expressing caution about their likely effects on consumers.
"Significant concerns" abound about anticipated increases in consumer prices.
The Wall Street Journal reports that tariffs can lead to higher costs for everyday products, with the extent varying based on factors like product type and availability of alternatives.
For instance, a 10% tariff on Italian wine could result in nearly a 10% price hike for consumers, whereas a similar tariff on a tablecloth from India might only raise its price by 2%.Premium products without close substitutes, such as certain electronics, are likely to pass nearly all of the tariff costs on to consumers.
'Largest tax increase in a generation'
Beyond consumer prices, there's concern about the broader economic implications.The Guardian highlights warnings from think tanks suggesting that the proposed tariffs could amount to the largest tax increase in a generation, potentially raising costs for American consumers by an average of $1,200 per year.
That could harm economic growth, lead to higher import costs, and prompt retaliation from foreign governments.
The manufacturing sector is also feeling the impact.MarketWatch notes that U.S. manufacturers have experienced a surge in supply costs, reaching a 33-month high, due to new or threatened tariffs.This inflationary pressure has led some companies to pause new orders, signaling reduced future demand and potential economic slowdown.
Additionally, the New York Federal Reserve has flagged potential new "inflation vectors" stemming from tariffs on Chinese imports, particularly affecting low-cost packages that previously entered the U.S. without customs duties.
If these exemptions are removed and Chinese exporters don't adjust their prices, American consumers could face higher costs, according to a Reuters report.
Prominent economists like Paul Krugman and Larry Summers have also voiced concerns. In a Yahoo Fiinance report, they warn that the tariffs may drive up prices, trigger job losses, and erode trust in the U.S. economy.
Schedule remains uncertain
President Trump has said he will implement tariffs on China, Canada and Mexico tomorrow (Tuesday) but most Washington observers consider that the schedule is a bit more flexible, amounting to brinksmanship as Trump tries to wring further concessions from America's three largest trading partners.
The tariffs had originally been scheduled for Feb. 4 but Trump granted a one-month reprieve to Mexico and Canada, while going ahead with a 10 percent tariffs on all products from China.
In summary, the consensus among economists is that Trump's tariffs could lead to increased consumer prices, hinder economic growth, and introduce significant uncertainties across various sectors of the economy.
Commerce Secretary Howard Lutnick said in a CNN interview earlier today that the president is still deciding how to proceed. "He's going to decide this afternoon and tomorrow we're going to put out those tariffs."