{"id":37730,"date":"2025-08-01T15:16:08","date_gmt":"2025-08-01T15:16:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/37730\/"},"modified":"2025-08-01T15:16:08","modified_gmt":"2025-08-01T15:16:08","slug":"trumps-trade-war-has-just-started-to-reach-american-wallets-as-tariff-deadline-hits","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/37730\/","title":{"rendered":"Trump\u2019s trade war has just started to reach American wallets as tariff deadline hits"},"content":{"rendered":"

It\u2019s Aug. 1, meaning we\u2019ve arrived at the Trump administration\u2019s self-imposed deadline<\/a> for countries to agree to trade deals<\/a> with the United States or face even higher new tariffs. Late Thursday, the administration said those tariffs will now go into effect on Aug. 7. It was never going to get anywhere close to hitting the original goal<\/a> of \u201c90 trade deals in 90 days\u201d<\/a> \u2014 actual trade deals are highly detailed documents that take months, if not years, to complete. But passing such deals was never the goal. What the administration meant was that it would, by today, set tariff rates on our trading partners. <\/p>\n

On that, it has made progress. I won\u2019t tick through every \u201cdeal\u201d that has been struck so far, (though The New York Times has that list if you\u2019re interested). The modal tariff rate appears to be 15%, as in the cases of the European Union, Japan and South Korea. But other countries face considerably higher rates, including 50% on Brazil and a threatened 25% on India. Instead, I\u2019ll summarize where we are now in President Donald Trump\u2019s trade war, what it means for you and where I think it\u2019s heading. <\/p>\n

Who is actually getting punished for the sin of trading with the U.S.?<\/p>\n

A good place to start is to explain why I put the word \u201cdeal\u201d in quotes. First, actual trade deals create granular trading rules that the countries that sign onto them agree to follow. They define what constitutes a financial institution or intellectual property, how disagreements will be resolved, how labor rights and environmental rules will be enforced and more. And their point is that once countries agree to the terms, existing trade barriers between the signatories come down.<\/p>\n

For the Trump administration, trade deals mean something quite different. It starts from the wholly incorrect premise that if we buy more from you than you from us, you are \u201cripping us off\u201d and must be punished (Brazil is an exception, as Trump wants to punish the country for prosecuting former President Jair Bolsanaro after his attempted coup). This foundational premise makes no more sense than arguing the movie theater is ripping you off when you voluntarily pay for a ticket. Firms import goods and services for the same reason you buy a movie ticket: because they think that it\u2019s worth it to them to do so. Which is why so many are complaining about the tariffs<\/a>, especially now that they\u2019re starting to really bite.<\/p>\n

All that is lost on the administration. The punishment takes the form of tariffs, which are sales taxes on imports, paid at first by the importer, who then tries to pass the costs down the chain to wholesalers and retailers and mostly to the person at the end of that chain: the American consumer. <\/p>\n

This raises an immediate, existential question about the trade war. Who is actually getting punished for the sin of trading with the United States? It was with great surprise this week that I heard some outlets describe Trump\u2019s 15% tariff on the European Union as a \u201cwin\u201d for the president<\/a>. In fact, the E.U. as a whole is our largest trading partner. We bought over $600 billion in goods from E.U. member nations last year, with pharmaceuticals and cars making up large shares of our imports. <\/p>\n

These purchases will now be more expensive for American consumers. The most up-to-date estimate from the Yale Budget Lab<\/a> is that the existing set of tariffs will cost the average household $2,400. I\u2019m highly confident \u2014 and polls confirm my view <\/a>\u2014 that people paying more for these goods don\u2019t call it a win. <\/p>\n

Though it took a while, we now have solid evidence that the trade war is raising prices. You\u2019d expect tariffs to show up in inflation rates for goods (tangible products you can own, like shirts or microwaves) as opposed to services (activities like haircuts or a doctor\u2019s visits). A few months ago, goods inflation was around zero; now it\u2019s tracking 3%<\/a>. As a Washington Post headline<\/a> put it: \u201cShoppers are stressed, but some brands are raising prices anyway.\u201d<\/p>\n

For three reasons, I believe we\u2019re seeing only the tip of a spear that\u2019s pointed right at our wallets. <\/p>\n

Big companies such as Procter & Gamble and Walmart are explicitly raising prices because of tariffs.<\/p>\n

First, Trump is escalating the fight. There was a moment after the first \u201cLiberation Day\u201d on April 2 when tanking markets forced him and his team to temporarily return to reality, pausing the tariffs for 90 days and generally looking for off-ramps. But those days are behind us, in part because markets appear to have, at least for now, adjusted to the trade war, while the hit to consumers is much more of slow burn than a market crash. <\/p>\n

Second, the Post article points out that big companies such as Procter & Gamble and Walmart are explicitly raising prices because of tariffs. Other companies, including Ford and GM, and also talking about big, tariff-induced hits to their bottom lines (Ford estimates a $2 billion hit<\/a> this year). These companies know the Trump administration doesn\u2019t take kindly to such pronouncements. Yet they\u2019re telling it like it is, in part because more consumer pass-through \u2014 and thus more price pressures \u2014 will be forthcoming. <\/p>\n

Third, there were two buffers that heretofore sheltered consumers, both of which are eroding. One was the inventory buildup that started when Trump returned to the Oval Office, as importing firms aggressively stocked up ahead of the tariffs. The other was squeezing profit margins built up during the pandemic to avoid immediately antagonizing inflation-weary consumers. Both buffers worked for a while, but both data and anecdote reveal that they\u2019re winding down.<\/p>\n

Finally, I started off this review of where things stand by acknowledging the administration\u2019s progress on setting tariff rates on our many trading partners. What I didn\u2019t tell you is that there\u2019s no chance this will all be somehow resolved today. Trump already extended his own deadline<\/a> for a trade deal with Mexico, America\u2019s largest trading partner. Anyone thinking \u201cwell, this trade war has been chaotic and damaging, but at least it\u2019s all settled\u201d is fooling themselves.<\/p>\n

Even the deals that have been announced are nowhere close to being made fully public. They are frameworks about which both sides have different interpretations<\/a>. For example, Trump thinks the E.U. has agreed to buy $750 billion worth of U.S. energy products and directly invest hundreds of billions more in the United States. But the E.U. says these are unbinding agreements that will be up to the thousands of private companies<\/a> across its 27 member states! Other big, high-profile deals, like those with Canada, India and even China, also remain very much unresolved.<\/p>\n

I wish I had better, more hopeful news. <\/p>\n

So that\u2019s where things stand today. Tariffs are raising the costs of domestic production \u2014 not a surprise, given that half of our imports are inputs into domestic manufacturing. Those costs are now being passed through in earnest to consumers. The administration doesn\u2019t appear to be seeking off-ramps; if anything, Trump has been escalating the tariffs, hitting trading partners with rates ranging broadly from 15% to 50%. And even the most important deals are still works in progress.<\/p>\n

I wish I had better, more hopeful news. But the fact is we are at the mercy of a president who deeply misunderstands the impacts of his actions in this space and is fully unconstrained by any of the traditional checks and balances. I do think that at some point, the politics of making life even more expensive for already economically stressed Americans hurts Trump and the Republicans who accommodate him. But between here and there, there\u2019s a lot of pain to come.<\/p>\n","protected":false},"excerpt":{"rendered":"It\u2019s Aug. 1, meaning we\u2019ve arrived at the Trump administration\u2019s self-imposed deadline for countries to agree to trade…\n","protected":false},"author":2,"featured_media":37731,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164],"class_list":["post-37730","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/37730","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=37730"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/37730\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/37731"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=37730"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=37730"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=37730"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}