Donald Trump backed down on some of his largest tariffs Wednesday afternoon, though the trade war is far from over and the US is still imposing major levies on Chinese goods and a 10% tariff on the vast majority of its other imports.
All imports are subject to 10% tariffs, with higher tariffs still in place for certain industries like steel, aluminum and cars. As of Wednesday, the president put a 125% tariff on all Chinese imports.
Trump paused his “reciprocal tariffs” for the next 90 days but the baseline tariffs will impact the economy. Prices are likely to go up across the board, from blueberries to new cars, imported wine and chocolates. Exactly when and how is unclear, though economists who study trade policy and the supply chain have a broad idea of how things will go down.
Here’s what we know so far about how tariffs will impact prices.
How much will tariffs cost consumers?
“It’s hard to know how these retailers are going to deal with this increase in cost,” said Katheryn Russ, an economics professor at University of California at Davis. “Different businesses are going to have to decide at various points along the supply chain how much it costs to suck it up themselves in the form of a squeeze on their profit margins, or pass it on to their customers.”
Over the last few months, as Trump threatened his tariffs, business leaders from companies like Best Buy, Levi Strauss & Co, AutoZone and Walmart have said they would have to pass increased costs on to consumers.
Some companies may opt to adjust to higher costs in other ways. After the pandemic, many American consumers noticed that bags of chips or drink bottles were getting smaller, though the product itself wasn’t getting any cheaper, a phenomenon known as “shrinkflation”.
Businesses could also decide to get rid of cheaper products that bring in lower profit margins, which would mean consumers would be left with a smaller slate of more expensive options.
Some companies and retailers may also see their costs rise and decide to increase costs across the board at a smaller scale, rather than targeting specific products with large price hikes.
“Implicitly when goods start disappearing as options, that’s a real price hike,” said Andrew Greenland, a professor of international economics at North Carolina State University.
When will prices go up?
There are a few things that factor into when a business will decide to increase prices.
Some businesses have been preparing for incoming tariffs by boosting their inventories, which could help them keep prices stable for a few weeks or months. This is why you see some businesses, like automakers Ford and Stellantis, offering deals to customers on their products, even though the tariffs are in place, to keep consumer confidence high.
But the inventories can only last so long, and some things, like fresh produce, can’t be stockpiled for long.
Meanwhile, other industries, like consumer electronics, have supply chains that are closely linked to places that have high tariffs, like China and Taiwan.
“It wouldn’t surprise me to see prices up tomorrow … based on these firms trying to anticipate what this is going to look like and passing those prices on pre-emptively,” Greenland said. “But I think over the next few months, we’re going to see the real bite of this.”
What industries will be hit the hardest?
The Yale Budget Lab estimated that textile imports will be hit particularly hard, making apparel prices rise 33% and non-apparel textiles rise 18%. Car prices are expected to rise 15.8%, which would be an increase of $7,600 to the average price of a car in 2024. Fresh produce could rise by 6.2%, with food prices overall going up 4.5%.
For consumer electronics that are mostly made in China, price increases could also be high. Because iPhones are mostly manufactured in China, the price of a new iPhone could climb more than 30%. One estimate, calculated when tariffs against China were going to be 54% instead of 125%, said that iPhone 16 could go up from $800 now to $1,142.
But ultimately, there is no industry that is truly untouched by tariffs.
“It’s not obvious or straightforward, tracing these cost increases through the supply chain, even for tariffs on final goods,” Russ said.
Tariffs are expected to have an impact on the labor market: unemployment could climb 0.5% by the end of 2025, which would be a loss of 600,000 jobs, according to the Yale Budget Lab.
Is there anything consumers can do to prepare for the impact?
Amid the uncertainty that the tariffs have introduced to the US economy, many consumers have said they are simply holding back on spending as they assess the impacts of the tariffs.
“That’s not a bad decision, to say ‘I’m going to cut back on this and cut back on spending,’” Greenland said.
Some consumers, like those who need a new car or computer, may find themselves in a place where they would want to make a big purchase before tariffs increase prices.
“There are two forces at play here where people are going to have to think carefully about what am I spending my dollar on, and am I spending it in a way that’s going to be help, not just for me now, but given what I expect prices to do in the future,” Greenland said.
