Although President Trump has hailed his recent trade announcements with China and the United Kingdom as victories, the United States continues to face a deeply uncertain economic picture—and persistently high tariff rates. The President’s recent announcement on China lowered the official tariff rate from its previously unsustainable level of 145% on Chinese imports to approximately 30% for 90 days. This 90-day pause still represents “a massive adjustment” compared to pre-Trump levels (see graph below). Similarly, the President’s announced deal with the U.K., which includes preferential tariffs for the first 100,000 auto imports to the US (10% instead of 25%), eliminates US tariffs on UK steel and aluminum, and punts negotiations for all other items, leaves tariffs on goods imported into the United States higher than they were before the trade fight began. We haven’t even seen deals with the rest of the world. Without a more significant shift in direction, our economy will continue to experience self-inflicted damage by one man: The President of the United States.
This moment of deescalation is a relief, since the consequences of Trump’s tariff policies—collapsing imports, manufacturer confidence plummeting, small businesses shuttering, etc.—were quite severe over the last month. Treasury Secretary Bessent himself admitted the previous escalation with China had reached the “equivalent of an embargo.” But replacing an embargo with broad-based tariffs that are merely severe is not enough to undo the damage caused by the President’s approach to international trade—especially when consumers and businesses have come to expect that the President could reverse course and push tariff rates back up at the drop of a hat. Recession odds are still higher and growth projections still lower than when Trump took office, and businesses—particularly small businesses—continue to face significant challenges. Moreover, fundamental questions remain about what happens after the 90-day truce with China expires, as there is nothing preventing either government from reimposing their triple-digit tariff rates if negotiations fail to produce a more permanent solution.
The Yale Budget Lab recently updated their projections of the Trump tariffs’ impact to include the US-UK and US-China announcements, as well as the Administration’s recent announcement of a temporary auto rebate program that allows manufacturers to offset tariffs on imported parts used in US-assembled vehicles. Even after these announcements, the average effective tariff rate on imports is the highest it has been since 1937. The drastic increase is largely driven by the broad, across-the-board tariffs on countries other than China (see graph below).
According to the same Yale Budget Lab estimates, the newest effective tariffs are projected to cost the average U.S. household $2,800 annually. Households in the second-lowest income decile will experience a substantial 2.9 percentage point reduction in disposable income, while those in the highest income decile will face a 1.2 percentage point decrease. Federal Reserve Governor Adriana Kugler summarized the effects best in a speech she gave earlier this week: “Trade policies are evolving and are likely to continue shifting, even as recently as this morning… Still, they appear likely to generate significant economic effects even if tariffs stay close to the currently announced levels, and the uncertainty associated with these tariffs has already generated effects on the economy through front-loading, sentiment, and expectations.”
Fed Governor Kugler also highlighted a survey of Texas business executives from the Dallas Fed that found 55% of respondents expect to pass through the costs of higher tariffs to their customers—and 64% of those expecting to pass on costs expect to do so within the first three months after tariffs take effect. This means that prices will likely rise between now and August.
Other data points underscore the unnecessary pain that Trump’s red light-green light tariffs are inflicting across the economy.
Small Businesses are getting hit with costs they cannot sustain: Today's NFIB Small Business Optimism Survey demonstrates a continuing deterioration in small business confidence. Only 18% of small firms reported that they have planned capital expenditures in the next 3 to 6 months—the lowest share since April 2020, the start of the COVID-19 pandemic—suggesting that tariff uncertainty is severely hampering future business investment plans among smaller firms.
Retailers and localities are worried about supply chain disruptions: Data from container-tracking company Vizion shows container shipments plummeting at major U.S. ports, like the Port of Portland, which experienced a 50% drop in exports – reaching levels, as the Portland Mayor noted, not seen since 2020. The executive director of the Port of LA warned that American retailers will soon run out of shelf inventory. In addition to raising prices, supply chain disruptions threaten reliable work schedules for thousands of dockworkers and truckers.
Manufacturers are pulling back, from hiring to production: Manufacturing payrolls declined by 1,000 in March and average weekly hours in the sector fell by 0.2. The Institute for Supply Management’s monthly manufacturing index compounds these concerns, showing contraction across new orders, production, and employment—indicating a broader slowdown in the sector.
President Trump and his Administration will continue to applaud themselves about the supposed deals they are making. But at the end of the day, the President’s policies are causing tremendous pain and uncertainty for consumers, businesses, and workers. Congress – specifically Republicans in Congress – can step up now and end Trump’s trade wars. The American people are watching.