Tariffs are a tax. Are you already paying it?

Summary

Summary of NPR's "Consider This" Episode: "Tariffs are a tax. Are you already paying it?"

Release Date: July 16, 2025
Host: Ailsa Chang
Title: Tariffs are a tax. Are you already paying it?

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Introduction: The Dawn of a New Tariff Era

In this episode of NPR's "Consider This," host Ailsa Chang explores the far-reaching implications of President Donald Trump's announcement on April 2, 2025, regarding sweeping tariffs on imports from nearly every territory worldwide. Intended to invigorate the U.S. economy, these tariffs have sparked significant debate among economists, business leaders, and consumers.

Key Announcement:

Donald Trump [00:03]: "My fellow Americans, this is Liberation Day waiting for a long time."

Trump heralded the tariffs as a monumental step toward revitalizing American industry:

Donald Trump [00:21]: "April 2, 2025, will forever be remembered as the day American industry was reborn, the day America's destiny was reclaimed, and the day that we began to make America wealthy again."

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Economic Predictions vs. Reality

Contrary to Trump's optimistic outlook, many economists and CEOs predicted economic downturns following the tariff imposition.

Economic Skepticism:

Larry Fink, BlackRock [00:37]: Summarized the concerns of CEOs who believed the tariffs might lead to a recession. Scott Horsley [00:47]: "Most CEOs I talked to would say." Donald Trump [00:50]: "We are probably in a recession right now."

Despite the administration's projections, the reality has been a fluctuating tariff landscape, particularly concerning China, with rates oscillating above 10% on most imported goods. The unpredictability has led to uncertainty in both markets and consumer prices.

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Government Revenue from Tariffs

President Trump highlighted the financial gains from the tariffs, emphasizing the substantial revenue generated for the federal government.

Revenue Claims:

Donald Trump [03:55]: "Already we've brought in over $100 billion. We'll be bringing in hundreds of billions of dollars."

However, experts argue that much of this revenue is absorbed by American importers and ultimately passed on to consumers, effectively acting as a hidden tax.

Economic Impact Analysis:

Scott Horsley [04:39]: "Last month alone tariffs brought in $27 billion, which is four times what the government raised for import taxes during the same month." Tax Foundation Estimate: "Tariff driven price increases will cost the average family $1,300 this year and $1,700 next year."

This represents the largest tax increase in over three decades, though it remains less visible as costs are integrated into everyday purchases rather than appearing as direct taxes.

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Consumer Price Increases and Market Effects

The primary concern is that tariffs are translating into higher prices for consumers, affecting a wide range of goods from electronics to clothing and automobiles.

Impact on Prices:

Jay Foreman, Toy Manufacturer [01:36]: "Those tariffs will start to affect the price of goods. Once you get above 10%, that's going to be a pass along." Alina Selyuk [02:00]: "Once it becomes clear that these are here to stay, no, it's going to end up being American consumers paying it."

Consumers have already begun to notice price increases in major retail outlets, with smaller stores and online retailers facing greater challenges in absorbing the higher costs.

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Retailer Strategies in Response to Tariffs

American businesses are adopting various strategies to mitigate the impact of tariffs, each with its own set of challenges and implications.

Primary Strategies:

1. Stockpiling Products: Importers are purchasing goods in advance to avoid future tariff hikes.
2. Absorbing Costs: Some businesses are choosing to bear the increased costs temporarily to delay passing them on to consumers.
3. Raising Prices: Without sufficient inventory or financial cushioning, some retailers are directly increasing prices.

Expert Insights:

Jin Soroka [07:11]: "Price increases are only starting to show up at the big stores. But shoppers may start to notice them more at smaller stores."

These strategies reflect a balance between maintaining consumer trust and managing financial viability amidst volatile tariff rates.

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Projected Economic and Political Implications

The sustained implementation of tariffs is expected to contribute to higher inflation rates, with long-term economic ramifications that extend beyond immediate price hikes.

Inflation Forecast:

Scott Horsley [09:58]: "It says we're likely to see higher inflation towards the end of the summer as more of those tariff costs are passed along."

Additionally, the interplay between tariffs and other government policies, such as the recent Republican tax cuts, raises questions about the overall fiscal strategy and its impact on different income groups.

Policy Interconnections:

Scott Horsley [09:10]: "The money the government collects from tariffs could help to make up for some of the money it's not going to collect in income taxes."

However, this approach has faced criticism for disproportionately benefiting wealthier taxpayers while imposing higher costs on lower-income families.

Political Ramifications:

Alina Selyuk [09:41]: "If you were trying to convince the vast majority of Americans that you have their best interests at heart, a policy that is going to raise taxes at the bottom and deliver a lot of benefits to the top, I think that's kind of a hard sell."

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Federal Reserve and Monetary Policy Tensions

Amidst these economic shifts, tensions between the White House and the Federal Reserve have emerged, particularly regarding interest rate policies.

Fed Chair Controversy:

Scott Horsley [10:07]: "President Trump was reportedly considering firing the Fed chair, Jerome Powell."

This move has introduced additional uncertainty into the economic landscape, causing temporary volatility in the stock market and highlighting the broader implications of intertwining political agendas with monetary policy.

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Conclusion: Navigating a Complex Economic Landscape

The episode concludes by emphasizing the multifaceted impact of tariffs on the U.S. economy. While intended to bolster American industry and generate government revenue, tariffs have introduced significant complexities, including increased consumer costs, strategic challenges for businesses, and broader economic and political tensions.

As the situation continues to evolve, both consumers and businesses must adapt to the shifting economic environment, with long-term implications still unfolding.

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Produced by: Erica Ryan and Connor Donovan
Edited by: Raphael Nahm and Courtney Dorning
Executive Producer: Sami Yenigun

Transcript

[Ailsa Chang]

It has been over three months since this.

[Donald Trump]

My fellow Americans, this is Liberation Day waiting for a long time.

[Ailsa Chang]

That's when President Trump announced very big across the board tariffs on imports from nearly every territory on earth, including uninhabited islands, a move that he said would revitalize the U.S. economy.

[Donald Trump]

April 2, 2025, will forever be remembered as the day American industry was reborn, the day America's destiny was reclaimed, and the day that we began to make America wealthy again.

[Ailsa Chang]

From the very start, Most economists and CEOs had a very different prediction. Larry Fink, head of the investment company BlackRock, summed it up succinctly.

[Scott Horsley]

Most CEOs I talked to would say.

[Donald Trump]

We are probably in a recession right now.

[Ailsa Chang]

Now, since that splashy White House announcement, the tariff rates have been a wildly moving target, ratcheted up then back down on China, specifically overlaid with global product specific tariffs on categories like automobiles and copper, partially paused after the stock market tanked. And through it all, the tariff rate has remained at or well above 10% on nearly every good imported to the U.S. and if you have listened to NPR's reporting since April, you will have heard many voices make one particular prediction over and over again that American consumers will pay the price. Like Jay Foreman, whose company makes toys like Tonka Trucks, Lite Brite and Care Bears.

[Scott Horsley]

Those tariffs will start to affect the price of goods. Once you get above 10%, that's going to be a pass along.

[Ailsa Chang]

Or Julie Heckman, who heads the American Pyrotechnics Association, a fireworks industry group. And of course she had a fireworks pun.

[Alina Selyuk]

I would anticipate that most people are going to get a little less than bang for their buck this year.

[Ailsa Chang]

Or Nobel Prize winning economist Paul Krugman.

[Alina Selyuk]

You know, once it becomes clear that these are here to stay, no, it's going to end up being American consumers paying it.

[Ailsa Chang]

Well, if American consumers are going to pay for the tariffs, the question is when? Consider this. You probably haven't noticed a big tariff impact yet. We'll look at how they're winding their way through the supply chain and where they could pop up. Next Foreign.

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[Ailsa Chang]

It's Consider this from npr. What is happening with prices and tariffs? President Trump spoke to reporters at the White House on Wednesday praising the money that the federal government is collecting from import taxes.

[Donald Trump]

Already we've brought in over $100 billion. We'll be bringing in hundreds of billions of dollars. And the tariffs really haven't kicked in that much other than automobiles and steel.

[Ailsa Chang]

Now, many American businesses have contributed to those billions as they're paying the tariffs. And the costs are starting to show up in store price. So what does that mean for back to school or even Christmas shopping? Well, NPR economics and retail reporters Scott Horsley and Alina Selyuk join us now to help answer that question. Hey to both of you.

[Scott Horsley]

Hi.

[Jin Soroka]

Hello, hello, hello, hello.

[Ailsa Chang]

All right, Scott, I want to start with you. How big of a windfall is this tariff revenue for the government and where is that revenue coming from exactly?

[Scott Horsley]

It's substantial. Last month alone tariffs brought in $27 billion, which is four times what the government raised for import taxes during the same month. A now the president would have you believe all that money is coming from other countries, just as he once promised that Mexico would pay for his border wall. In fact, while foreign suppliers might absorb some of the cost, it's US Importers that get the tariff bill. And this week's inflation data shows that some of the cost is now being passed on to US Consumers. The non partisan Tax foundation calculates this amounts to the largest tax increase in more than three decades. But it's a sneaky tax increase because you don't get a bill from the irs. Instead, the cost just shows up in the price of everyday purchases at Walmart or Best Buy or the like. The Tax foundation estimates that tariff driven price increases will cost the average family $1,300 this year and $1,700 next year.

[Ailsa Chang]

Okay. And Alina, so people are already starting to pay all of this right now?

[Jin Soroka]

Yeah, to some extent. You know, price increases are only starting to show up at the big stores. But shoppers may start to notice them more at smaller stores. It's the small sellers on Amazon or your mom and pop shops that are having the hardest time covering the higher import bills from increased tariffs. Even though the biggest tariff hikes are still on pause. Even with a 10% tariff, shop owners are having to front thousands of dollars in cash for their shipments. And they're having to make difficult choices, you know, like, do they still ship more? Do they hold their products in China and wait? Or is that too risky if tariffs skyrocket after August 1, as Trump has threatened?

[Scott Horsley]

The irony is, while Trump is warning of even higher tariffs on August 1, forecasters say that might not raise a lot more money for the government. For one thing, the President has a habit of backing down on his tariff threats. But even if he does follow through and boost the tariff on goods from Europe, for example, from 10 to 30% as he's threatened, that doesn't mean the government's revenue would triple. Because beyond a certain price point, people just stop buying those imported products. No sale, no tax income. We saw that this spring when the tariff on goods from China briefly went to 145% and the cargo traffic basically dried up. Any kind of tax has the potential to sway people's buying decisions. And the higher the tax is, the bigger that distortion's likely to be.

[Ailsa Chang]

Right. Okay, so maybe businesses might pause shipments if tariffs skyrocket. Is that already happening? Alina?

[Jin Soroka]

Yeah. Talking to retailers, they seem to have three strategies for tackling tariffs. Number one is to stockpile products that got shipped in advance of tariffs and slowly sell them off. Number two is pay the higher tariff on shipments and eat some of that cost for now, delaying the big jolt to shoppers. And the third strategy is to raise prices now because you don't have any stockpile or cash cushion to eat the tariff.

[Alina Selyuk]

And.

[Jin Soroka]

And depending on the store, people are doing a bit of column a, bit of column B, a bit of column C. So you're seeing some stuff going up in price, like electronics, clothes, toys, and especially appliances that are facing extra steel and aluminum tariffs. But prices aren't soaring dramatically across every store. At least not yet.

[Ailsa Chang]

At least not yet. You're saying not yet because I guess it is going to come.

[Jin Soroka]

You know, I'm currently watching Back to School shopping for higher prices, and there's an interesting dynamic playing out. A lot of retailers are putting huge, huge value on this back to school season because they're worried that the holidays are just not going to be that great. And the idea is that more and more shipments from China or other countries are going to face higher tariffs. Prices will rise, and shoppers who are already feeling jittery about spending are going to tighten their belts. And so retailers think, maybe let's stuff. Let's sell stuff for back to school while the going is good. Get those dollars locked in now and gird up for whatever happens in the winter. At the Port of Los Angeles, which is America's busiest, Executive Director Jin Soroka had a bleak forecast.

[Alina Selyuk]

Lower inventory levels, fewer selections, and higher prices are likely as we head into the holidays.

[Jin Soroka]

He's saying shipments saw a bit of a pause in May as Trump seemed to shift his position on tariffs. And now importers are catching up, presumably to stockpile before August 1st. Okay.

[Ailsa Chang]

Well, Scott, the tariffs are one big piece of the president's agenda, of course, but another big piece is the Republican tax cut that passed earlier this month. How do these two items fit together? Do they?

[Scott Horsley]

Well, the money the government collects from tariffs could help to make up for some of the money it's not going to collect in income taxes. So you could look at this as the government taking money from one pocket and putting it back in the other. But about 60% of the savings from the tax cut go to the wealthiest 20% of taxpayers. The while the cost of tariffs falls hardest on people towards the bottom of the income ladder. So the government is taking money from the pockets of blue jeans to put into the pockets of Armani suits. Economist Alex Durande of the Tax foundation says that's not likely to be very popular.

[Alina Selyuk]

If you were trying to convince the vast majority of Americans that you have their best interests at heart, a policy that is going to raise taxes at the bottom and deliver a lot of benefits to. To the top, I think that's kind of a hard. I think that's a hard sell.

[Scott Horsley]

The Federal Reserve came out with its latest beige book today. It's a roundup of economic conditions around the country, and it uses the word tariff 75 times.

[Alina Selyuk]

Wow.

[Scott Horsley]

It says we're likely to see higher inflation towards the end of the summer as more of those tariff costs are passed along.

[Ailsa Chang]

Okay. Well, speaking of the Federal Reserve, President Trump was reportedly considering firing the Fed chair, Jerome Powell. What's been the reaction to that?

[Scott Horsley]

Yeah, this is part of an ongoing pressure campaign by the White House which wants the Fed to lower interest rates. Trump says he talked about firing Powell with a group of GOP lawmakers last night. Now, it's legally doubtful he has the authority to do that, but just the news he was thinking about. It caused a brief sell off in the stock market and the president quickly backed down.

[Ailsa Chang]

That is npr. Scott Horsley and Alina Selyuk, thank you to both of you.

[Jin Soroka]

Thank you.

[Alina Selyuk]

You're welcome.

[Ailsa Chang]

This episode was produced by Erica Ryan and Connor Donovan. It was edited by Raphael Nahm and Courtney Dorning. Our executive producer is Sami Yenigun. It's Consider this from npr. I'm Ailsa Chang.

[Alina Selyuk]

This summer on Planet Money Summer School, we're learning about political economy.

[Planet Money Host]

We're getting into the nitty gritty of.

[Alina Selyuk]

What government does with things like trade.

[Planet Money Host]

Taxes, immigration and health care.

[Donald Trump]

So politics and economics, which are taught separately, they shouldn't be separated at all. I think you have to understand one.

[Jin Soroka]

To really appreciate the other.

[Alina Selyuk]

So what is the right amount of government in our lives? Tune into Planet Money Summer School from npr.

[Planet Money Host]

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