Yves here. Much of the public’s attention has gravitated towards Trump’s standoff regarding Iran and other international affairs in Venezuela and Cuba, as well as his blatant scapegoating maneuvers—from the debacle at the reflecting pool to his controversial entrance in a catering truck. As a result, many of his detrimental actions that directly impact everyday Americans, such as his tariffs, are receiving far less scrutiny than they deserve.
It’s worth noting a critical fact that emerges later in this discussion: A study by the Dallas Federal Reserve revealed that Trump’s tariffs contributed to an increase in annual inflation—from 2.3% to 3.2%, as observed through the central bank’s preferred inflation metric.
Considering that corporate profits are currently at a record high percentage of GDP, businesses could shoulder some of these tariff costs. However, the prevailing trend of short-term thinking combined with customer exploitation often discourages such action.
By Kent Jones, Professor Emeritus of Economics, Babson College. Originally published at The Conversation
President Donald Trump’s tariff declarations no longer provoke the market fluctuations they did in 2025. However, the shock to American consumers is becoming increasingly evident, especially as economic sentiment deteriorates ahead of the midterm elections in November 2026.
Numerous business organizations had hoped that the tariff conflicts would conclude in February, following the Supreme Court’s ruling that overturned Trump’s emergency tariffs. However, they received a rude awakening five months later when Trump announced a series of new import taxes to replace those that had been invalidated.
Encompassing nearly all U.S. imports, the advantage of these tariffs lies in their grounding in existing U.S. trade laws, effectively insulating them from the Supreme Court’s review. Trump has expressed his intentions to implement numerous additional tariffs of this type.
As a trade economist tracking the developments in the tariff wars, I contend that the longer these import taxes remain in effect, the greater the burden consumers will bear. The 2025 “Liberation Day” tariffs previously struck down by the Supreme Court, along with other new levies Trump introduced post-February ruling, were temporary. However, the majority of the newly enacted tariffs are designed to be permanent.
This means that for consumers, the overall cost burden is likely to escalate even if the tariff rates themselves remain unchanged, as new tariffs will accumulate on top of pre-existing ones.
The Cost Squeeze
On one hand, Trump’s obsession with tariffs is puzzling. Tariffs remain widely unpopular, raising questions about why Trump would amplify them before midterm elections, especially with his approval ratings, including economic perception, being so low.
On the other hand, Trump’s adoption of tariffs can be interpreted as a means of asserting personal power. He has long regarded them as tools for negotiation leverage, recently proclaiming that U.S. tariffs “aren’t high enough.” He has also deflected criticism regarding their impact on consumer prices with the false claim that foreigners bear the costs.
The reality is that U.S. tariff invoices issued by the Treasury Department go to American companies importing these foreign products. These companies may attempt to absorb part of the costs to protect market share and manage their existing inventories. Nevertheless, the inevitable pressure will force them to pass the majority of that additional tax onto American consumers, regardless of which foreign nations are affected.
Now that tariffs have had sufficient time to permeate the economy, researchers have identified a noticeable impact on prices. The Dallas Federal Reserve recently estimated that without tariffs, the Fed’s preferred inflation measure would have risen at an annual rate of 2.3% in March, instead of the observed 3.2%. An analysis by the Yale Budget Lab concluded that consumers are absorbing anywhere from half to the full cost of these tariffs through increased prices, depending on the type of product.
Tariffs Upon Tariffs
Trump founded his July tariff announcements on three distinct legal justifications: unfair trade practices, such as forced labor (known as Section 301); national security, under Section 232; and discrimination against U.S. imports, outlined in Section 338. The latter represents a trade war tariff from the Smoot-Hawley Tariff Act of 1930.
The new Section 301 tariff rates, which apply globally, currently range from 10% to 12.5%, with the potential for increases at the president’s discretion.
Section 301 has also paved the way for new, country-specific tariffs targeted at Brazil, at 25%, while Section 338 has been cited to impose an additional 50% import tax on certain Canadian goods. Additionally, Trump has introduced levies ranging from 25% to 50% on specific products, including steel, aluminum, automobiles, copper, timber, lumber, and pharmaceuticals.
Yet even more new tariffs are anticipated on wind turbines, medical gear, robotics, machinery, and coal, as well as measures to address foreign production excess and bolster U.S. production of foreign generic prescription drugs.
With numerous tariffs in play, consumers will face even more pressure, as many of these taxes will be added on top of one another. For instance, Section 301 tariffs will accumulate on the older tariffs established by WTO rules, setting a baseline Most Favored Nation rate, as well as stacking on other tariffs.
Thus, if a country faces tariffs for forced labor violations and excess capacity, each at 10%, in addition to a uniform Most Favored Nation rate of 3%, the total rate on all products from that country would amount to 23%. Ultimately, these costs will be borne by U.S. consumers, not foreign producers.
Pushback From the States
Trump is particularly focused on Section 301, designed to address foreign trade practices deemed discriminatory or unfair that burden U.S. commerce. It imposes no upper limits on tariff rates and grants the president the authority to discriminate among countries. Historically, federal courts have granted the president broad latitude in executing this statute.
Trump has opted to use this provision to penalize nearly all U.S. trading partners, alleging that they fail to prevent imports produced through forced labor. His administration anchored this conclusion on its own investigation, claiming the U.S. is the only nation actively preventing forced labor imports.
These tariffs were set at 12.5% for countries lacking formal prohibitions on forced labor imports, and 10% for those with such prohibitions. Their scope and impact closely resemble those of the earlier Liberation Day tariffs.
Twenty-five U.S. states subsequently challenged these levies in the U.S. Court of International Trade. They employed reasoning similar to that of the Supreme Court when it invalidated emergency tariffs, citing them as unconstitutional taxes on American consumers. The lawsuit argues that the Section 301 tariffs inflict a similar affordability burden and points out the administration’s failure to clarify how tariffs were calculated or their potential for removal.
The lawsuit further contends that the new tariffs extend beyond the intended purpose of Section 301, which aims to open specific markets for U.S. exports through negotiated policy changes, rather than imposing broad tariffs without a clear objective.
The success of this legal challenge may hinge on judicial continuity in deferring to the president regarding such levies, regardless of how divergent they may be from established practices. I suspect Trump is banking on this compliance.
