When President Donald Trump introduced a sweeping set of tariffs over 100 days ago, it immediately sent shockwaves through the financial markets and triggered recession fears among economists.
Yet, as the economy continues to demonstrate resilience, Wall Street seems to be adapting to the ongoing tariff environment, responding with relative indifference to the new threats of tariffs.
In the months since these tariffs were enacted, analysts have begun to evaluate their impact on the U.S. economy.
Some economists, speaking to ABC News, pointed to tangible results stemming from the tariffs, such as higher-than-anticipated tax revenue and commitments from corporations to invest in U.S. manufacturing capabilities.
However, these commitments are often long-term and carry the risk that companies might backtrack on their plans as the political landscape surrounding tariffs shifts.
Rising tariffs have contributed to a gradual increase in prices, raising concerns that inflation could negatively affect consumers and overall economic stability.
Despite rolling back some of his most severe tariffs, including those on imports from China, President Trump recently announced intentions to impose tariffs as high as 50% on numerous countries, including significant partners like Japan and South Korea.
According to the Yale Budget Lab, American consumers are currently facing an effective tariff rate of 20.6%, marking the highest level since 1910.
The Trump administration defends the tariff policies as a crucial component of a broader “America First” economic strategy, which it claims has led to trillions of dollars in new investments across sectors such as manufacturing, technology, and infrastructure.
In theory, tariffs are intended to encourage companies to establish manufacturing operations in the United States to avoid the added expenses associated with tariffs on imports.
Several high-profile companies have pledged increased investments in the U.S., including tech giants like Apple and Nvidia, as well as pharmaceutical firms Merck and Johnson & Johnson, and automotive manufacturers Hyundai and Stellantis.
Morris Cohen, a professor emeritus specializing in manufacturing and supply chains at Duke University, remarked that the goal is to incentivize businesses to bring their manufacturing operations back to the U.S. and adjust the trade balance favorably.
Nevertheless, analysts note that companies are grappling with making costly, long-term investments while enduring the unpredictable nature of Trump’s tariff policies, which have seen numerous changes since he took office.
May’s court rulings have placed some tariffs in legal limbo, adding uncertainty as federal appeals courts assess the legality of a significant portion of these measures.
Matias Vernengo, an economics professor at Bucknell University, expressed skepticism about the sustainability of these corporate commitments, suggesting that many may ultimately fail to meet their promises.
He criticized the inconsistency of tariff policies, stating, “It would be nice if he announced a tariff policy and stuck to it. But that’s not what’s happening.”
While facing criticism, the Trump administration contends that adaptable tariff policies grant leverage in trade negotiations with targeted nations.
Moreover, tariffs have generated substantial tax revenues for the U.S. federal government, with importers paying a total of more than $100 billion in tariffs this year alone.
Recent data shows that the U.S. Treasury collected around $27 billion in tariff-related taxes last month.
Mark Zandi, chief economist at Moody’s Analytics, posited that tariff revenues could surpass $300 billion by the end of 2025.
This figure could equate to nearly 1% of the U.S. gross domestic product and provide some relief for government deficits, although Zandi is cautious about the potential longevity of these revenues.
He cautioned that it might be imprudent for lawmakers to rely on this revenue in the future, given the ongoing legal challenges and the potential for future administrations to roll back or eliminate tariffs.
The U.S. economy has largely evaded the feared tariff-related price hikes so far, although there has been a modest uptick in inflation attributed to the tariffs.
In June, consumer prices saw an increase of 2.7% when compared to the previous year, meeting economist projections but representing a slight increase from the prior month.
The inflation rate remains below the 3% recorded in January, shortly after Trump assumed office.
Particularly notable was the sharp rise in prices for imported goods, such as toys, which saw price increases that were six times faster than just two months earlier.
Commonly imported items, including clothing, furniture, and bed linens, also experienced significant price hikes.
Vernengo indicated that, while tariffs might temporarily boost inflation, the longer-term implications will depend on the Federal Reserve’s responses regarding interest rates.
He concluded by saying, “Prices will go up as Trump imposes tariffs. Then, as tariffs are established and prices adjust themselves, they will stop growing. It’s the Fed’s reaction that will matter more in my view than the tariffs.”
image source from：abcnews
