What do Trump's tariff threats mean for the U.S. economy? Prices will rise on everything from fruits to cars
Data from the Yale University Budget Lab shows that Trump's tariff policy and the retaliatory tariffs it triggered will lead to a 0.75 percentage point increase in the U.S. CPI. Import-dependent automakers may be severely impacted, with analysts estimating that General Motors and Stellantis will see a 50% reduction in earnings per share, while Ford will see a 25% reduction
If Trump insists on imposing high tariffs on major trading partners, the negative consequences will ultimately be borne by American consumers—resulting in price increases for all goods, from fresh fruits and automobiles to electronics.
On Tuesday local time, Yale University's Budget Lab released data showing that Trump's tariff policy and the retaliatory tariffs it triggered will lead to an increase of 0.75 percentage points in consumer prices (CPI) in the United States. If consumers switch to purchasing domestic products or low-tariff imports, this figure will drop to 0.65. In 2023 dollars, this means a loss of purchasing power of over $1,000 for each household.
According to a previous report by CCTV News, on the 25th local time, President-elect Trump stated that he would impose a 25% tariff on all products entering the United States from Mexico and Canada.
If this tariff policy is implemented, companies that rely on imports (especially automobile manufacturers) may face a significant increase in costs, which will subsequently be passed on to consumers.
Moreover, if we estimate the inflationary effects based on the higher tariffs promised during Trump's campaign, the impact will be even more pronounced. As inflation is about to reach a turning point, Trump's high tariff policy undoubtedly brings more uncertainty to the prospects of interest rate cuts next year.
It is worth noting that the additional costs brought about by high tariffs will severely impact the profits of General Motors, Ford, and Jeep manufacturer Stellantis, all of which produce vehicles in regions south of the U.S. border and rely on locally produced components.
Evercore ISI estimates that under the new tariff policy, General Motors and Stellantis's earnings per share (EPS) will decrease by 50%, while Ford will see a reduction of 25%. The stock prices of these three companies all fell on Tuesday, with General Motors' stock price dropping as much as 9%.
The proposed tariffs are set to take effect in January, and the American Retail Federation stated that this will have a huge impact on fresh fruits and vegetables.
David French, senior vice president responsible for government relations at the industry organization, stated that for every $100 worth of avocados, tomatoes, raspberries, strawberries, and peppers imported from Mexico, American importers will pay an additional 25% in taxes; while for $10 billion worth of beer, tequila, and mezcal from Mexico, importers will also be subject to a 25% tax