Tariffs, often referred to as duties or levies, serve as strategic deterrents. They are designed to incentivize domestic firms to source more products within the country by imposing penalties on those that import foreign-made goods. When a tariff is applied—whether on watermelons, washing machines, or high-tech components—U.S.-based companies importing these items are required to pay a percentage of the item’s price to the government. This rate is determined by federal officials. Ultimately, this cost tends to be passed down and paid by you, the consumer.
In response, domestic producers seize on the opportunity to artificially increase their own prices, making their products appear more competitive than they naturally would be. This situation highlights how tariffs can inadvertently lead to increased costs for consumers and distort market competition.
President-elect Donald Trump, who insists tariff is his new favorite word, has suggested a 60% tariff on goods from China and 10-20% on other imports. Trade experts say this could raise costs in apparel, technology, electronics, and appliances as some companies are already preparing to increase prices if these tariffs are enacted. It’s unclear how Trump will implement the tariffs or if the final rates will be smaller.
Quote: “If we were to see the full panoply of tariffs that candidate Trump proposed, you would see a substantial increase in the price of almost everything we buy every day,” said Scott Lincicome, vice president of general economics and trade at the libertarian-leaning Cato Institute.
Mary Lovely, a senior fellow at the nonpartisan Peterson Institute for International Economics, told Business Insider that Trump could implement his proposed tariff on Chinese goods quickly — within the first half of 2025 — using an authority in the Trade Act. But she added that it was possible the president-elect wouldn’t follow through on the 60% tariff he proposed on the campaign trail. He also proposed a 10% to 20% tariff on goods imported from other countries.
“Nothing is taxed at 60% right now, so every sector is vulnerable to seeing higher tariffs,” Lovely told Business Insider, adding that she’d expect a lower tariff, such as 20% or 25%. There’s also the question of how much of the tariff burden would fall on consumers, Lovely said, and a lot of it depends on the mechanisms Trump uses to implement the tariffs.
Trump claimed his tariff proposals wouldn’t affect consumer prices but would tax other countries and boost U. S. manufacturing. Previous tariffs had mixed outcomes; 2018 tariffs on washing machines increased laundry item prices. However, smaller tariffs on Chinese imports were not inflationary, and President Biden kept most in place.
“Consumers are going to be at a burden, but it may take some time for them to feel it, like a slow drip,” Lovely said.
Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation, said both companies and consumers should prepare for higher prices. He told BI that companies were already concerned.
“Whether it’s a finished good or an input to production, anything that gets brought into the country from somewhere else is going to get hit with that tax,” Gold told Business Insider. However, when asked about tariffs’ impacts on inflation, Trump’s spokesperson Karoline Leavitt said, “President Trump’s first-term tariffs against China created jobs, spurred investment, and resulted in no inflation.”
PoliticsRSS Tidbit: The Tax Foundation analysis found the tariffs together add up to $79 billion, which theoretically leads to an additional $625 in taxes annually for the average U.S. household. The Tax Foundation also argues the tariffs would raise prices while reducing output and employment.
In 2018, Trump implemented a 50% tariff on washing machine imports, leading to a significant price increase of about 12%, or $86 per unit. This resulted in U.S. consumers collectively paying an additional $1.5 billion annually for these products. It’s reasonable to expect that similar tariffs from a future Trump administration would have comparable effects, placing the economic burden squarely on consumers.
If tariffs cause prices to rise, these goods may become more expensive for Americans under Trump’s proposals, according to economists and trade experts.
Apparel and shoes
According to the National Retail Federation, Trump’s proposals are projected to significantly impact consumer costs, with apparel prices expected to rise by 12.5%, footwear by a substantial 18.1%, and travel goods such as backpacks and wallets seeing an increase of 13%.
A Bank of America research note indicated that retailers sourcing over 20% of goods from China, like Crocs and American Eagle, faced higher risks from Trump’s tariff proposals. Crocs stated it had “strong partnerships” globally and was adept at navigating supply chain challenges.
“As is standard, we will continue to monitor changing regulations and legislation as we move into the new administration and we remain nimble in our ability to respond to the same,” Crocs said, adding that it would continue to look for product sourcing outside China.
Some retailers plan to raise prices if Trump’s tariffs take effect. Columbia Sportswear CEO Tim Boyle expressed concern about the tariffs and told The Washington Post the company was “set to raise prices” in response.
Electronics
An October Consumer Technology Association report estimated proposed tariffs would raise laptop and tablet costs by 45%, smartphone costs by 25. 8%, video-game consoles by 39%, and televisions by 9%. China, a major supplier, accounted for 87% of US video-game-console imports, 78% of smartphone imports, and 79% of laptop and tablet imports in 2023, meaning price increases for everyday products like smartphones and laptops are likely.
Shifting production out of China is not easy, Gold said.
“You can’t change a supply chain overnight,” Gold said. “It takes months, if not years, to be able to find a new vendor that you’re comfortable with that can meet all of your different requirements, has the capacity, the skilled workforce, the infrastructure works within the country.”
Cars and Auto Parts
Major car companies import auto parts from China, Mexico, and Europe. Executives have warned that Trump’s tariffs would likely increase prices. Philip Daniele, CEO of AutoZone, stated in a September earnings call that if the tariffs proceed, “we will pass those tariff costs back to the consumer.”
“We generally raise prices ahead of that,” Daniele said, adding that prices would settle over time. “So, that’s historically what we’ve done.”
Shinji Aoyama, Honda’s executive vice president, said on a November earnings call that Trump’s proposals would significantly impact Honda and other car companies like General Motors and Ford. However, he believed tariffs would take time to be imposed, at which point Honda might consider moving production to avoid US tariffs.
Lovely stated that much of the auto parts production comes from China, so price increases are “very reasonable.” However, shifting production would be challenging because if Trump imposes a 10% to 20% universal tariff, “there’s no safe place,” she said.
PoliticsRSS Tidbit: According to the non-partisan Peterson Institute for International Economics, Trump’s proposed new tariffs could reduce American incomes by up to 4% for the poorest fifth and around 2% for the wealthiest fifth. These findings highlight why it’s crucial to consider who ultimately bears the cost of such policies and how they might impact household finances across different income levels.
Furniture
The National Retail Federation estimated a 10% universal tariff and a 60% tariff on Chinese imports would raise furniture costs by 6. 4%. A $200 crib could cost $213, and a $2, 000 mattress set could rise to $2, 128. The NRF noted low-income households would be hardest hit as they spend twice as much of their income on furniture compared to high-income households. Henrik Elm, CFO of Inter Ikea, said the company was preparing for higher tariffs under Trump by making its supply chain more responsive.
“I think we are better equipped than we have been ever before,” Elm said, adding, “Of course we are not immune to changes.”
Appliances
In 2019, NPR reported higher appliance prices, like washing machines, due to a 20% tariff imposed by Trump. The National Retail Federation expected a further 19. 4% price increase on items like stoves and fridges under Trump’s tariff proposals. A basic fridge’s price could rise from $650 to $776.
So, when will the price increases go into effect?
Gold said Trump’s tariffs were unlikely to take effect immediately, and it’s hard to predict when consumers would feel the impact.
“It could also depend upon the individual companies and what their tariff mitigation plans are and how much they can try and lessen the impact on the consumers,” Gold told Business Insider. “Obviously, larger companies might have little more ability to do that than small, medium-sized folks who really can’t absorb the impact of the tariff and would immediately have to pass on those costs.”
Groceries
Trump vowed to lower grocery prices by restricting food imports to boost US production. However, his tariff plans might increase prices.
The centrist think tank Third Way analyzed eight common purchases the US heavily imports or can’t produce domestically. Using International Trade Commission data, the report estimated Trump’s tariff proposals would increase coffee costs by $0. 23, frozen beef by $1. 09, and olive oil by $0. 31.
Although the price increases might appear minor at first glance, they will undoubtedly accumulate over time as consumers make their weekly grocery trips and purchase multiple items. It’s important to recognize how these small increments can significantly impact overall spending, making it essential to consider the long-term effects on your budget.
Supporters of Trump’s trade policies, including Trump himself, assert that tariffs serve as a protective shield for domestic markets, encouraging local producers to grow and thrive. They also view tariffs as a strategic economic tool. For instance, Trump recently warned John Deere, the Illinois-based tractor manufacturer, with a 200% tariff if it relocates production to Mexico.
But, economists have long speculated that imposing U.S. tariffs could lead foreign producers to reduce their prices in order to maintain access to the vast and profitable American market. The global trend of decreasing tariffs was disrupted by the Trump administration’s 2018 levies, providing a unique opportunity to evaluate this theory in practice.
Black Friday is in a few weeks, and you should be able to find post-holiday sales from December 26 to mid to late January. It might be wise to plan.
