Recently, I wrote about what prices might go up due to the tariffs President Trump is imposing.
Among them are autos; laptops, tablets, and smartphones; furniture; appliances; shoes; books; carpet; and paper products. Also likely to increase in costs are fertilizer, cotton, wool, alcohol, bottled water, pet food, baby supplies, groceries, home improvement tools and materials, batteries, TVs, cleaning supplies, and personal hygiene products.
As I’ve been doing my regular shopping, I’ve been buying extra items. See the photo above. I think what’s going to happen is instead of many prices being increased, as are the most common predictions, the price of most items will go up.
Corporations will raise prices because they can. It happened during the pandemic and following the pandemic. After supply side issues ended, prices remained high. Corporations made record earnings through the elevated prices, and they gave those profits to shareholders, including company leaders, rather than reducing prices for consumers.
How do tariffs work?
A tariff is a tax. It’s paid by companies and manufacturers who are ordering products from other countries that they’ll sell or use them to make other products. An example: when the United States imposes a tariff on goods imported from Canada, that tariff is paid by the U.S. firms that buy those goods.
The money goes to the federal government. President Trump loves tariffs and said tariffs are “the most beautiful word in the dictionary.”
Trump thinks tariffs could bring jobs back to communities hurt by companies moving factories overseas. He’s also has said he’d like to make tariffs a larger source of revenue for the federal government, moving away from the income tax system that’s been in use since the early 1900s.
However, tax professionals, supply chain analysts, trade lawyers, and economists say that tariffs haven’t been a reliable tool for either objective, according to interviews conducted by Bankrate.com, a personal finance website.
Companies would likely require years, if not decades, to bring their operations back to the U.S., a process that could still end up being more expensive, those interviewed said. In the meantime, research has shown that consumers end up footing the bill, as companies pass along higher tariffs through price increases.
How much will consumers pay for the new tariffs?
The potential cost of higher prices from tariffs for U.S. consumers could be up to $78 billion a year, according to a study conducted for the National Retail Federation, a trade association for retailers.
Some examples from the report: A $100 winter coat would cost $12 to $21 more, while a $50 tricycle would cost $18 to $28 more. The price of a $2,000 mattress and box spring set would increase by $128 to $190, and a $650 refrigerator would go up by $126 to $202. And the price of running shoes would increase, too, with a $90 pair costing $16 to $26 more.
Jonathan Gold, vice president at the NRF, said retailers currently rely heavily on imported goods to keep prices low for U.S. consumers, and Trump’s proposed tariffs would raise costs significantly.
“A tariff is a tax paid by the U.S. importer, not a foreign country or the exporter,” Gold said. “This tax ultimately comes out of consumers’ pockets through higher prices.”
In addition, grocery prices could rise, even rapidly at times, and gas prices may increase, too. Home prices may go up if lumber prices increase in cost. As for increased tariffs on China, cellphones and other electronics could cost more.
U.S. households are likely to pay about $1,000 to $1,200 a year under the new tariffs, analysts say.
Again, it’s low-income consumers who will be hardest hit by these price increases.
How will the proposed new tariffs affect the economy?
At least a dozen estimates on Trump’s proposed tariffs show they’ll have a harmful effect on the American economy, supporting the standard view among economists that tariffs reduce trade and distort production, leading to lower standards of living, the Tax Foundation, a tax research organization, said in a statement.
Many of the same studies also included estimates of the economic effects from Trump’s first term trade war, which range from a reduction in real output of 0.2 percent to 0.7 percent.
Final thoughts
What to do? Stock up on items if your budget allows. I bought a pair of sneakers, see photo above, when I was looking for boots at The Rack. I’m also buying more nonperishable food items.
In addition to buying extra items now, compare prices when you shop and add to your emergency fund.
