Last week, the Trump administration announced the scanning of new taxes on imports of almost all countries. A reference rate of 10% came into force on April 5, and specific prices in the country as high as 50% will start on April 9. Empirical research shows that, in recent years, the cost of American rates has been fully transmitted to consumers. According to Yale’s LAB budget, Trump prices are expected to increase prices this year by 2.3 percentage points, which cost an average of American households on average $ 3,800 per year. Economic experts, including the president of the Federal Reserve Jerome Powell, expect the new prices to supply higher inflation.
Trump’s economic damage makes a recession more likely. The “reciprocal” tariff announcement last week has sent scholarship markets worldwide – with a 10% drop in S&P 500 in two days – by dolning billions of market value. Sunday, Goldman Sachs updated his probability of recession from 35% to 45%, saying that if the prices of April 9 come into force, “we expect to change our predictions to recession.” Last week, JP Morgan increased its probability of 60% recession in anticipation of commercial wars growth.
With a few exceptions, the so-called reciprocal rates apply to all imported goods. This includes goods that are not possible to grow or make in the United States on the scale necessary to meet American demand. For example, less than 1% of the coffee consumed in the United States is cultivated at the national level. And around 60% of fresh fruit is imported.
With the fully in force prices, Americans can expect to pay more for grocery store, shoes and clothing, household necessities, automotive parts and recreational items. Figure 1 provides illustrative examples of price increases that Americans could see if the specific prices in Trump are fully transmitted to consumers. For example:
- A set of toddler clothes made in Cambodia (49%price) at a price of $ 24 could now cost $ 35.76.
- Jeans made in Egypt (price at 10%) at a price of $ 39.98 could now cost $ 43.98.
- A football ball made in Pakistan (price 29%) at a price of $ 17.99 could now cost $ 23.21. About 70% of world football balls are made in northeast Pakistan.
- Brazil coffee (10%price), the largest source of coffee consumed in the United States, at a price of $ 8.30 could now cost $ 9.13.
- A 2025 SUV made in Mexico at a price of $ 31,395 would be subject to the 25% of automotive prices of the Trump administration – and could cost $ 39,244. The previous modeling by the budget laboratory provided that, due to automotive rates of 25% alone, “the prices of motor vehicles increase by an average of 13.5%, the equivalent of an additional $ 6,400 at the price of a new 2024 average car.”
Figure 1
The Trump administration’s tariff rates have been unveiled without launching main complementary policies to accelerate American production, and do not explain if production could be raised. The price formula also does not consider if a country is an essential economic or security partner; engages in non -market practices; Or maintains industries with adequate labor or environmental standards. Americans will pay the Trump administration’s chaotic trade war price. President Trump has deployed a regressive tax that will hit households with low income the hardest income, while putting pressure on the Congress to spend billions of tax alternatives that benefit the rich.
Thanks
The author thanks Ryan Mulholland, Mimla Wardak, Lily Roberts, Natalie Baker, Amina Khalique and Sophie Cohen for a precious contribution and Bill Rapp for the design of data visualization.
