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Today was supposed to be the day that President Donald Trump’s so-called “reciprocal” tariffs on dozens of countries kicked in after a three-month delay, absent trade deals. But their introduction has been postponed, again.
The new, August 1 deadline prolongs uncertainty for businesses but also gives America’s trading partners more time to strike trade deals with the United States, avoiding the hefty levies.
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Mainstream economists would probably cheer that outcome. Most have long disliked tariffs and can point to research showing they harm the countries that impose them, including the workers and consumers in those economies. And although they also recognize the problems free trade can create, high tariffs are rarely seen as the solution.
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Trump’s tariffs so far have not meaningfully boosted US inflation, slowed the economy or hurt jobs growth. Inflation is “the dog that didn’t bark,” Treasury Secretary Scott Bessent likes to say. But economists argue inflation and jobs will have a delayed reaction to tariffs that could start to get ugly toward the end of the year, and that the current calm before the impending storm has provided the administration with a false sense of security.
“The positives (of free trade) outweigh the negatives, even in rich countries,” Antonio Fatas, an economics professor at business school INSEAD, told CNN. “I think in the US, the country has benefited from being open, Europe has benefited from being open.”
Consumers lose out
Tariffs are taxes on imports and their most direct typical effect is to drive up costs for producers and prices for consumers.
Around half of all US imports are purchases of so-called intermediate products, needed to make finished American goods, according to data from the Organisation for Economic Co-operation and Development.
“If you look at a Boeing aircraft, or an automobile manufactured in the US or Canada… it’s really internationally sourced,” Doug Irwin, an economics professor at Dartmouth College, said on the EconTalk podcast in May. And when American businesses have to pay more for imported components, it raises their costs, he added.
Likewise, tariffs raise the cost of finished foreign goods for their American importers.
“Then they have to pass that on to consumers in most instances, because they don’t have deep pockets where they can just absorb a 10 or 20 or 30% tariff,” Irwin said.
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