Commentary by Stephen Macaulay
One of the things that hasn’t gotten the attention it deserves is what even the Trump Administration knows tariffs do: Raise the cost of goods in the country importing them.
So, simply, the price of goods being imported into the US are more expensive for those who are buying them.
Most things that we buy have some intermediary. It’s not like its farm-to-table (you picked it; you cooked it).
You may buy something from General Motors. You may buy something through Amazon.
In both cases, if they are sourcing something from another country (e.g., GM builds trucks in Canada and Mexico, both of which have 25% tariffs; Kindles aren’t made in Seattle, but in places including China, which has a 30% tariff), then their invoice is increased.
What’s more (actually less) is that the value of the US dollar has been declining consistently since “Liberation Day” in April. There is a measure known as the “US Dollar Index,” which compares the value of the dollar against a basket of currencies. A higher number is better.
So here’s how it is going:
--March: 104.21
--April: 99.47
--May: 99.33
--June: 96.88
--July (so far): 97.48
Down, down, down.
This means that when paying for those imported goods, it costs more dollars today than it did in March.
There is an argument that a weaker dollar is more advantageous for exporters from the US.
But here’s the thing: US exports haven’t exactly been struggling.
That is, in 2014 the value of US exports was $1.62 trillion. Ten years later, 2024, the number was up to $2.064 trillion.
That’s a 27% increase.
The Administration has consistently argued that the countries of origin are the ones who pay the tariffs.
Which is patently untrue.
To use a hackneyed example: It is just like Mexico was going to pay for the Wall.
It was easy for Trump supporters to believe that fabrication because unless they lived in the neighborhood of the Wall, they really didn’t have a sense of what was or wasn’t being built. (As things turned out, not much of the Wall was new construction. And
Mexico didn’t pay for it.)
More importantly, the Wall claim didn’t have a visible impact on the supporters’ buying power.
Tariffs are different.
There is a 50% tariff on coffee beans from Brazil. The US imports as much as 50% of its coffee from Brazil — because the US isn’t conducive to growing coffee, not because the Brazilian people are “ripping us off!”
Just wait until people start seeing that putting Folgers in their cup is going to get a lot more expensive. And the wait won’t be long.
The Administration — from President Trump to Treasury Secretary Scott Bessent — have been saying that there is an expectation that US corporations will absorb tariff-associated costs.
Which means that there is an expectation that US corporations will essentially underwrite the tax that tariffs are on the consuming public.
Let’s go back to the coffee example. Walmart, which sells a whole lot of groceries to a whole lot of Americans, has a profit margin on groceries of less than 3%.
What the Administration is saying is that Walmart needs to reduce that margin even further in order to absorb the tariff costs.
Back in May during the Walmart earnings call, CEO Doug McMillon, who quite evidently understands how businesses operate, said, "We will strive to keep our prices as low as possible. However, due to the significant scale of the tariffs . . . we cannot absorb all the pressure given the reality of slim retail margins . . . the elevated tariffs will lead to increased prices.”
It can’t be put any simpler than that.
How much is that jar of coffee going to cost?
What is the alternative to importing coffee? The US mainland isn’t conducive to the crop. This is just how the world works, despite what the Administration would like us to believe.
And while on the subject of buying things at places at Walmart, as kids across the country right now know — and are not particularly happy to know it — this is “Back to School” season.
When I was young my mom took me to a department store and bought me some new shoes and clothes to wear for the forthcoming school year. And all of my classmates, to a greater or lesser degree, evidently had the same experience.
Here’s this from the latest (July 23) research from The Yale Budget Lab:
“The 2025 tariffs disproportionately affect clothing and textiles, with consumers facing 40% higher shoe prices and 36% higher apparel prices in the short-run. Shoes and apparel prices stay 19% and 17% higher in the long-run respectively.”
Moms across the country are going to have more than a slight surprise when they go “Back to School” shopping.
There is no way that everyday Americans are going to escape the higher prices that the tariffs are putting on the goods that they buy every day.
While bringing back manufacturing to the US is a laudable goal, have you heard any articulation from anyone in the administration how they are going to facilitate this?
If they were serious about bringing back manufacturing there would be a Moon Shot-like series of programs that would help fund the development of industries that will be viable in the years ahead. Instead, all they seem to be doing is trashing green energy technology (does anyone really think that coal is the future of energy?) and eliminating tax incentives and regulations that make it more likely that car companies will not build electric vehicles — which will mean that the US will pretty much be an island of old automotive technology compared to the rest of the world — with the exception of Cuba.
Macaulay is pundit-at-large for The Hustings.