American consumers and businesses were confronted Friday with the implications of President Donald Trump’s new foreign trade agenda, one that introduced a range of tariff rates affecting dozens of countries.
Late Thursday, President Trump revealed a new set of tariff rates targeting 66 countries, including the European Union, Taiwan, and the Falkland Islands.
Among the notable tariffs are a hefty 40% on imports from Laos, 39% on goods from Switzerland, and 30% on South African products.
Interestingly, some trade partners like Cambodia benefited as their export tax rates to the U.S. saw reductions compared to what President Trump had previously threatened.
The president decided to postpone the implementation of all tariffs from Friday to August 7, providing a temporary reprieve for many consumers and businesses.
Wendong Zhang, an associate professor in the Dyson School of Applied Economics and Management at Cornell University, indicated that there could be mixed feelings among U.S. consumers regarding the newly announced tariff rates, pointing out that they are generally lower than earlier threats made by Trump.
For instance, the tariff on goods from Indonesia was decreased from an initial rate of 32% to a more manageable 19%.
However, it is important to recognize that tariffs function as a tax, which means U.S. consumers may end up bearing part of the financial burden.
According to Zhang, while prices may not spike as dramatically as once feared, they are still expected to rise, albeit at a lower rate than in a worst-case scenario.
Companies across various sectors are opting for different strategies in response to the new tariffs.
Many automakers currently appear to be absorbing the costs of the tariffs for the time being.
Conversely, EssilorLuxottica, the world’s largest eyewear maker, has announced a price increase in the U.S. market as a direct result of the tariffs.
EssilorLuxottica manufactures Ray-Bans and other eyewear, grinding lenses and sunglasses in Mexico, Thailand, and China, while also importing premium frames from Italy.
The backdrop of these tariffs can be traced back to President Trump’s broader import tax agenda, first unveiled in April.
At that time, Trump argued that the new tariffs would foster domestic manufacturing and restore fairness within global trade relations.
However, the situation has evolved considerably, particularly after a 90-day pause on tariffs was instituted shortly thereafter, with a 10% tax on most imports remaining intact.
By early July, Trump was sending letters to numerous countries announcing that higher tariffs would be imposed if no trade agreements were reached by August 1.
In a further announcement last Thursday, new tariff rates for various countries were disclosed, but the implementation deadline was again pushed to August 7.
As for tariffs unrelated to specific countries, a 50% levy on imported aluminum and steel remains in effect as well.
Already, existing tariffs are having noticeable effects on consumer prices.
According to figures released by the U.S. Commerce Department, prices rose by 2.6% in June, a slight increase from the 2.4% annual rate recorded in May and exceeding the Federal Reserve’s target of 2%.
Wendong Zhang pointed out that products heavily reliant on imports, such as furniture, appliances, and computers, have started to see noticeable price increases.
Consumers may anticipate further hikes in the prices of appliances and goods that depend significantly on steel and aluminum, such as toys, kitchenware, electronics, and various home goods.
Furthermore, Zhang emphasized that a 15% tariff does not automatically equate to a 15% increase in consumer prices, as companies have been preparing for tariff deadlines in various ways.
This preparation includes stockpiling goods and implementing other strategies to alleviate the immediate financial impacts.
In some cases, consumers may even find benefits arising from certain trade agreements.
For instance, as part of a trade deal struck with the European Union, European companies have committed to purchasing $750 billion worth of natural gas, oil, and nuclear fuel from the United States over the next three years.
Additionally, Zhang highlighted potential advantages for U.S. farmers, pointing out that Vietnam has agreed to purchase $2 billion in agricultural products from the U.S. over a similar time frame, including commodities like corn, wheat, and soybeans, as noted by the International Trade Council.
However, cautioning against future expectations, Zhang warned that such agricultural agreements may be short-lived, with the uncertainty surrounding tariffs likely leading countries such as China to seek trade partnerships elsewhere.
Price increases in food and beverages are nearly certain to occur as a result of the new tariffs, according to a recent analysis by the nonpartisan Tax Foundation.
The U.S. lacks sufficient domestic production of certain food items—like bananas or coffee—to meet ongoing demand, making price volatility inevitable.
Other produce, fish, beer, and liquor are also predicted to experience significant price hikes.
Conagra Brands, known for popular items like Hunt’s canned tomatoes and Reddi-wip, has already declared that tariffs, particularly the 50% tax on imported aluminum and steel, will add approximately $200 million to its annual costs.
As a result, the company plans to pivot its supplier base and also anticipates raising prices.
Ben Aneff, managing partner at Tribeca Wine Merchants and president of the U.S. Wine Trade Alliance, stated that beginning Friday, consumers should prepare for price increases in the range of 20% to 25% at his stores due to tariffs coupled with the declining value of the dollar.
Aneff explained that the impact of higher duties has been delayed for shoppers, but with a new 15% tariff coming into play, European wine prices might experience a jump of 30% as soon as September.
Clothing and shoe prices are already trending upward as imports dominate this market, with approximately 97% sourced from overseas, primarily from Asia, according to the American Apparel & Footwear Association.
Although China remains the primary supplier, companies have recently begun shifting more sourcing to countries like Vietnam, Indonesia, and India.
While Steve Lamar, president and CEO of the trade group, refrained from estimating future price increases due to the evolving situation, he acknowledged that customers will soon feel the pinch of rising costs, potentially leading companies to discontinue products that have become too expensive or to scale back on promotional deals.
Matt Priest, CEO of the Footwear Distributors and Retailers of America, has noted that shoe prices are already on the rise as back-to-school shopping approaches, estimating increases in the 5% to 10% range.
In contrast, Lululemon announced in June that any price hikes would be modest and confined to a small segment of its products.
Conversely, Ralph Lauren has confirmed that prices will increase this fall and next spring to account for the impact of the tariffs.
In the automotive sector, car prices have remained steady despite the new tariffs—at least for now.
While certain automakers have opted to raise prices to counteract tariffs, luxury sports car manufacturer Ferrari has expressed intentions to observe how Trump’s trade deal with the European Union unfolds before adjusting a 10% surcharge imposed previously on most U.S. vehicles.
Notably, Kelley Blue Book reported that the average new car price in June reached $48,907, representing only a slight increase of $108 from the previous month.
However, caution is advised as the situation could shift, particularly in light of statements from General Motors, which indicated that the repercussions of tariffs might become increasingly apparent in the third quarter.
GM has projected that tariffs may cost the company between $4 billion and $5 billion this year.
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