According to economists and analysts, the trade war is not over, and Americans can still pay a huge price.
Even after the US and China agree to suspend taxation on each other for 90 days, the net purchasing power of US households is expected to shrink at an average annual average of $2,800, Yale’s Budget Lab estimated Monday.
The researchers’ current estimates are lower than the $4,900 hit predicted based on their April 15th play status, but still reflect a stab wound of nearly 18%, with the highest average effective tariff rate in over 90 years.
President Donald Trump has slowed, watered down, and lowered many of his toughest import taxes in recent weeks. He has partially walked the slate of global duties since announcing it last month, giving some reprieve to 25% automotive rates and then reduced Chinese duties to 30% after hiking 145%. The administration last week issued a summary of the trade agreement with the UK, saying it plans to continue “productive” consultations with Beijing officials over the weekend.
But analysts and executives say the disruption created by Trump’s rapidly changing trade policies has already struck supply chains and is beginning to rewrite corporate strategies, including pricing. Perhaps the only major predictive economist is continuing to speak up with confidence. Consumers are looking at higher prices from customs duties.
“The company is a company that advises CEOs on corporate strategy and finance,” said Andy West, senior partner at McKinsey, consulting firm that advises CEOs on corporate strategy and finance. “You’re going to have to respond,” he said.
The CEO of Barbie Maker Mattel said last week that higher prices are on the table, but the expansion of domestic manufacturing is not the case.
“It’s okay, let him go, and we’ll put a 100% tariff on his toys, and he won’t sell one toy in the US, and that’s their biggest market,” Trump replied with an oval office remark, he also defended his resignation at the British luxury car brand, Rolls-Royce.
There remains a major question as to what the global trade order will look like a year from now, making it difficult to draw solid conclusions from recent data on the state of the economy or from recent data on where it is heading next.
“There was a considerable inconsistency between soft data trying to capture feelings, confidence or lack of that, and essentially hard data,” Bankrate senior economic analyst Mark Hamrick told NBC News this month.
He said the latest employment data looked stronger than analysts had predicted, but many warned that it was already a dated snapshot of the labor market. Even a better inflation report on Tuesday failed to shock investors. Despite the consumer price cooldown, major stock prices remained largely unchanged.
Sheemashya, chief strategist at Principal Asset Management, warned his clients on Tuesday that “longer inflation uncertainty,” saying that “clear reading” of the instructions “is not visible for months yet.” Analysts at Capital Economics said, with the exception of inflation counts in April, “If tariff impacts begin to accelerate, this month is likely to be another story.”
In many industries, the trade war has affected supply chains that are already operating at a lead time of several months. Retailers currently stock holiday items. Fireworks Cellars recently told NBC News that the tariff plan had scrambled its final shipment wave on July 4th. Global trade data shows that manufacturing demand has plummeted amid recent weeks of US-China trade tensions, and experts warn that it is unlikely that the recent tariff ceasefire will cool the anxiety that has already hit shipments.