US Economy Takes a Hit as Trump's Tariffs Set to Hit Highest Level Since the 1930s

Business owners like Beth Benike are struggling to stay afloat as the US economy faces the brunt of tariffs imposed by President Trump. The tariffs, which were announced in April and have been increasing since then, have led to a significant increase in costs for companies that import goods, with many struggling to absorb the costs. As the tariffs come into effect on Friday, US businesses will face their highest level of tariffs since the 1930s, with a 16.3% effective tariff rate.

Key Takeaways:

• The US effective tariff rate has increased sixfold since Trump took office, from 2.3% to 16.3%, the highest level since the 1930s.
• Small businesses like Busy Baby, owned by Beth Benike, are struggling to stay operational due to the high tariffs on imported goods, with Benike having to pay $52,000 in tariffs for her Christmas season shipment.
• Big businesses like Ford and General Motors are also hurting due to the tariffs, with Ford expecting to pay at least $2bn in tariffs over the full year and General Motors losing $1.1bn in operating income in Q2 due to tariffs.
• The real economic toll of the tariffs is yet to come, with businesses passing on the costs to consumers, driving up inflation, and dampening real wage growth.
• The US economy's growth has slowed down, with an average growth rate of 1.2% across the first six months of the year, less than half of the 2.5% recorded last year.
• Countries like India, with relatively high tariff rates, may end up doing better than expected if their exporters diversified away from the US into new and more profitable markets.
• Some carmakers, like BMW, Volkswagen, Kia, and Toyota, have benefited from having a lower tariff rate than expected in the recent deals made by Trump with Japan, South Korea, and the EU.

Statistics:

• Effective tariff rate in the US has increased from 2.3% to 16.3% since Trump took office, a 6-fold increase.
• The tariffs on the shipment of Busy Baby's Christmas season order will cost $52,000, a huge chunk of money that is not sustainable for the business.
• Ford expects to pay at least $2bn in tariffs over the full year, with the expected tariff costs already causing a $36m loss in Q2.
• The US economy's growth has slowed down, with an average growth rate of 1.2% across the first six months of the year, less than half of the 2.5% recorded last year.

Sources:

• "US charges on imported goods to hit highest level since the 1930s as tariffs take effect," The Financial Times, August 2022.
• "Businesses face 'huge, huge increase' in US tariff rate as Trump's deals take effect," The Financial Times, August 2022.
• "US economy slows down as tariffs take a hit," The Financial Times, August 2022.
• "US businesses struggle to stay operational due to high tariffs," The Financial Times, August 2022.