In April, the US administration under President Donald Trump announced the implementation of new tariffs, which are additional taxes imposed on importing companies for bringing goods into the country.
Since the announcement, several of the United States’ major trading partners, including the UK, Japan, and most recently the European Union, have engaged in negotiations to lower the initially proposed tariff rates. The EU’s agreement entails a reduction by half of the 30% tariff that had been threatened by the Trump administration.
However, other nations continue to face elevated rates, including Canada, which is projected to experience a tariff increase to 35% on August 1, should a resolution not be reached.
The Trump administration asserts that these tariffs will generate billions of dollars in revenue and incentivize companies to establish manufacturing operations within the United States to avoid the taxes.
Nevertheless, there are indications that these levies may be contributing to price increases for American consumers. Economists suggest that the full impact of these increases on American consumers is yet to be realized.
Which products are most likely to become more expensive as a result?
A significant proportion of clothing and footwear sold in the US is manufactured in other countries, particularly in manufacturing hubs such as Vietnam, China, and Bangladesh.
While the Trump administration has scaled back from the most substantial tariffs initially proposed, import taxes from these nations remain significantly elevated.
According to current plans, the US is imposing tariffs of at least 30% on goods produced in China and intends to initiate taxes of 19% on items originating from countries such as Vietnam and Indonesia on August 1. Tariffs as high as 35% have been outlined for goods from Bangladesh.
These measures are exerting pressure on major US department stores like Target and Walmart, which are commonly frequented by Americans for affordable clothing options. Prominent apparel brands, including Levi Strauss and Nike, have also indicated that they will increase prices for select items.
Following several months of decline, apparel prices increased by 0.4% from May to June. The Budget Lab at Yale, which monitors the economic impact of government policies, anticipates an overall surge of 37% in clothing prices in the short term.
Given that nearly all coffee consumed in the US is imported, it could soon represent a more substantial expense for American consumers.
Coffee originating from Brazil faces tariffs of 50%, while coffee from Vietnam is likely to be subject to a tariff of 20%.
With tariffs of 15% in place on products from European Union nations, prices of essential items such as Italian, Spanish, or Greek olive oil could increase.
The Trump administration has separately raised tariffs against Mexico, a major supplier of products such as tomatoes and avocados, although certain key exemptions have been granted.
The Budget Lab at Yale estimates that food prices will rise by 3.4% in the short term, with fresh produce experiencing a particularly sharp initial increase.
The US stands as one of Europe’s largest alcohol export markets, with European companies such as Pernod Ricard and LVMH generating €9 billion (£7.8 billion) in alcohol sales to the US annually. The country accounts for approximately a third of Irish whiskey exports and nearly 18% of champagne exports.
However, European Commission President Ursula von der Leyen has not confirmed whether alcohol will be included in its tariff agreement with the US or whether it will be exempted along with other agricultural and food products.
Meanwhile, under tariffs announced in April, Mexican beers like Modelo and Corona are anticipated to become more expensive due to levies on aluminum, which affects beers packaged in cans. According to the Beer Institute, the majority of beer in the US – 64.1% – is served from cans.
The Trump administration has been particularly interested in imposing tariffs on imported vehicles, with the intention of increasing the price of foreign-made cars to benefit American firms.
In March, the administration introduced a 25% levy on imported passenger vehicles and parts in an effort to “protect America’s automobile industry.”
This has since been reduced to 15% for cars from key exporters, including the European Union and Japan, while importers will pay 10% on UK cars.
These tariffs have not yet led to a significant increase in car prices.
Erin Keating, an executive analyst at Cox Automotive, suggests that this is due to firms “absorbing more of the burden [from tariffs] and not passing the added costs to consumers.”
However, as costs escalate, the sustainability of this approach remains uncertain.
The Trump administration’s hopes that the tariffs will boost sales by US companies may also prove to be counterproductive.
This is because many cars manufactured in the US depend on parts or materials sourced from overseas. Certain brands sold by US companies are also assembled outside the country, including in factories in Canada and Mexico, thereby subjecting them to the 25% levy. Consequently, these offerings are at a disadvantage compared to those from key foreign competitors.
Following the Trump administration’s increase in tariffs on steel and aluminum earlier this year, prices for steel in the US increased. A 50% levy on copper is scheduled to commence on August 1, and tariffs on lumber have also been threatened.
All three materials are essential for home construction.
The National Association of Home Builders (NAHB) in the US has cautioned that these measures could elevate the cost of building homes – which predominantly use wood in the US – and potentially deter developers from constructing new homes.
“Consumers ultimately bear the cost of the tariffs in the form of higher home prices,” the NAHB stated.
The magnitude of this impact will depend on whether the Trump administration resolves its trade dispute with Canada, one of the largest suppliers, which currently faces potential tariffs of 35%.
According to a report by the Canadian Chamber of Commerce, the US imports approximately 69% of its lumber, 25% of its imported iron and steel, and 18% of its copper imports from Canada.
The European agreement will increase the quantity of energy Europe buys from the US, which von der Leyen stated will “replace Russian gas and oil” with cheaper liquefied natural gas (LNG), oil, and nuclear fuels from America.
However, the tariffs do not necessarily translate to favorable outcomes for US consumers.
In general, the Trump administration has exempted oil and gas imports from tariffs.
However, a 10% rate has been imposed on energy exports from Canada, America’s largest foreign supplier of crude oil. According to official trade figures, 61% of oil imported into the US between January and November 2024 originated from Canada.
The US does not face a shortage of oil, but its refineries are designed to process “heavier” or thicker crude oil, which predominantly comes from Canada, with some sourced from Mexico.
“Many refineries require heavier crude oil to maximize flexibility in gasoline, diesel, and jet fuel production,” according to the American Fuel and Petrochemical Manufacturers.
Therefore, should Canada decide to reduce crude oil exports in response to US tariffs, it could lead to an increase in fuel prices.
Additional reporting by Lucy Acheson
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