Stop me if you’ve heard this one before: a new wave of tariffs are taking effect today.
Announced on July 31st, the latest set of tariffs imposed by President Donald Trump on foreign imports — possibly illegally — will set a floor of 15 percent for around 40 countries with a trade deficit with the US. There’s an even higher rate for another couple dozen countries, as CNN has reported. This raises the floor for many countries from the universal tariff rate of 10 percent that Trump previously levied, though some goods, like smartphones, are carved out of higher rates. Tariff escalation seems far from over, with Trump threatening on Wednesday to impose a 100 percent tariff on semiconductors — unless companies build manufacturing plants in the US.
As Trump has ratcheted up pressure on foreign imports over the last few months, some Americans might not have noticed a marked difference in what they’re spending, especially as huge tax hikes have been announced and then delayed or cut back. Trump’s perpetually changing tariff deadlines and rates led a Financial Times columnist to coin the phrase “TACO trade,” short for “Trump Always Chickens Out.” But experts say that some product categories have already seen clear price upticks, and more are likely on the way. Meanwhile, businesses have been left bracing for the impact of added taxes on imported goods, dealing with the uncertainty of how and whether they’ll actually take effect.
Experts warn that this new, broad wave of taxes, compounding existing baseline tariffs, may soon become more noticeable. “The impact of tariffs comes like waves, and it comes in slow motion,” says Monica Gorman, managing director at Crowell Global Advisors and a former National Economic Council official in the Biden administration. “Because of the way supply chains are structured, we don’t feel it right away. But that doesn’t mean we aren’t going to feel it. And, in fact, I think we will begin to start to feel it this fall and winter.”
“The impact of tariffs comes like waves, and it comes in slow motion”
So far, consumer-facing businesses in particular have taken steps to avoid raising prices for their customers as the economy is already facing a pullback in spending. “For those businesses that know that their consumers have less ability to absorb, they’re going to do everything they can before they raise prices,” Gorman says. That’s meant doing things like stocking extra inventory before Trump’s first round of “Liberation Day” tariffs took effect in April. “They’ve now sold through that inventory,” Gorman says. “And so what’s coming in now is orders that were not yet in the United States when the tariffs went into effect, and that is only going to rise from this point forward.”
The impact might look different across sectors or hit at different points. For example, this new wave of tariffs includes a 20 percent tariff on goods from Vietnam and other places in Southeast Asia, where apparel production is common, likely impacting clothing goods. The National Retail Federation (NRF), a trade association, notes that automotive supply retailers have more wiggle room in their margins to absorb added costs than grocery stores. But even when retailers don’t pass on costs to consumers, the NRF argues that it could still hurt the economy more broadly. “This is because cuts are made elsewhere — in jobs and investments,” Mark Mathews, the NRF’s chief economist, wrote in a July blog post. “Falling business investment has been the key driver of GDP reductions in previous recessions.”
Uncertainty about what tariff policies might look like in the next year or even week contributes to businesses’ hesitancy to make long-term strategic changes. “If you’re a business and looking to make a three- to five-year investment, are you certain that this is the tariff environment that you’re going to have in five years? Particularly if you’re looking to build in the United States?” Gorman asks. “Given that uncertainty, I would anticipate we may still see capital sitting on the sidelines, businesses still playing a game of wait-and-see, until there’s just more sense of what the longer term outlook is.”
Another confusing element for businesses to navigate is a new 40 percent tariff on transshipments, or goods shipped indirectly to the US without “substantial transformation.” The idea is to make sure suppliers aren’t evading high tariffs by routing through countries facing lower ones, and a senior Trump administration official told reporters last week that this definition could be substantially broadened, The New York Times reported. Doing so could mean added costs for businesses that are currently difficult to predict.
So far, US businesses and consumers have really only seen the first phase of tariffs’ impact, says a source familiar with corporate lobbying efforts, who spoke on background to give insight into private conversations. “Companies have been preparing as much as they possibly could, but the sort of on again, off again; numbers up, numbers down; letters, no letters; do we have an executive order? Do we have a fact sheet? Do we have a Truth Social post? have made it hard to plan.” As Thursday’s so-called “reciprocal” tariffs take effect, this person says, consumers may soon begin to see their effect reflected in prices. “Anyone who tells you, ‘well, we’ve had tariffs for six months and they’re not hurting the economy,’ they’re really leaving out the fact that those big reciprocal tariffs that the President has imposed haven’t gone into effect yet, and that we’re still going to see those impacts start to really hit people.”
Gorman expects consumers to notice tariff impacts in more purchases this holiday season. Even though many businesses tried to stock up ahead of “Liberation Day” in April, they are also constrained by storage space and cost for extra inventory. Still, some product categories, like baby products, have already seen large impacts. Since many baby products can’t easily move manufacturing from China where Trump has already levied high tariffs, products like strollers and car seats have just recently started to see average retail prices rising anywhere from 10 to 35 percent, Gorman says.
“The last several months, these tariffs really have upended the global trading system as we’ve known it,” Gorman says. “Putting these tariffs on is asking everyone across the board to rethink how they do business. And that’s a lot for any economy to absorb.”
