Why Has the Tariff Effect Been So Mild?

Summary

WSJ What’s News: Why Has the Tariff Effect Been So Mild?

Release Date: August 6, 2025

In this episode of WSJ What’s News, hosted by Alex Osaleh, listeners are provided with an in-depth analysis of the surprisingly subdued impact of recent U.S. tariffs, the shifting dynamics within the American automotive industry, and the administration’s escalating pressures on public universities. The episode also touches on critical changes within the Bureau of Labor Statistics and a notable incident at Fort Stewart base. Below is a comprehensive summary of the key discussions and insights from the episode.

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1. U.S. Tariffs: Limited Impact So Far

Executive Order on Indian Imports

President Trump has recently signed an executive order imposing an additional 25% tariff on imports from India, citing India's continued purchases of Russian oil—a move India has vehemently opposed, labeling the tariffs as "unfair, unjustified, and unreasonable." This new levy, set to take effect in 21 days, brings the total U.S. tariffs on Indian imports to 50%, aligning them with the punitive tariffs already imposed on Brazil.

Gene Whalen on Tariff Effects

Gene Whalen, WSJ economics reporter, provides a nuanced perspective on the actual effects of these tariffs:

• Inflation: While there has been a slight uptick in inflation—June saw a rise of 2.7% year-over-year ("inflation has ticked up a little bit due to the tariffs")—it remains under control compared to initial fears of rampant price increases.

• Trade Deficit: Contrary to Trump's promises, there hasn't been a significant or sustained reduction in the U.S. trade deficit. The minor drop observed in June appears to be more of a technicality than a sign of long-term improvement.

• Tariff Revenue: The U.S. government is indeed collecting more revenue from tariffs, fulfilling one of Trump's objectives. However, this revenue is insufficient to offset income tax revenues, as suggested by critics.

Absorbing Tariff Costs

Gene Whalen further elaborates on how U.S. companies are managing the additional tariff burdens:

• Cost Absorption: Numerous U.S. firms are choosing to absorb the extra costs rather than passing them onto consumers immediately. This strategy is partly due to pre-tariff inventory buildups and a reluctance to increase prices unless absolutely necessary ("US Companies are absorbing the extra tariff costs").

• Future Inflation: Economists anticipate that companies will eventually transfer more of these costs to consumers, leading to a gradual rise in inflation, albeit not as sharply or as prolonged as initially predicted ("everyone expects inflation to continue rising due to the tariffs").

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2. U.S. Stock Market and Corporate Investments

Market Performance and Corporate Commitments

The episode highlights a positive movement in U.S. stock markets:

• Stock Indexes: The Dow Jones Industrial Average edged up by approximately 0.2%, the S&P 500 rose about 0.7%, and the Nasdaq increased by around 1.2%.

• Apple’s Investment Pledge: In a significant development, Apple announced an additional investment of $100 billion in U.S. operations during a White House event, reinforcing the company's commitment to expanding domestic manufacturing. This is in addition to a previous $500 billion four-year commitment made in February, which analysts believe primarily reshaped Apple’s existing U.S. spending plans ("Apple will pledge to invest another $100 billion in U.S. operations").

Presidential Meetings

President Trump is set to meet with Russian President Vladimir Putin to discuss ending the war in Ukraine, following an offer made by Russia during envoy Steve Witkoff’s trip to Moscow. Additionally, Trump has expressed openness to engaging with Ukrainian President Volodymyr Zelensky. The timing and location of these meetings remain undisclosed ("President Trump will meet soon with Russian President Vladimir Putin").

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3. Automotive Industry: A Shift Back to Gas-Powered Vehicles

Policy Changes Impacting EV Investments

The Trump administration's recent policies have favored traditional gasoline-powered vehicles over electric vehicles (EVs), prompting a strategic realignment within the U.S. automotive sector. Sharon Terlip, WSJ auto industry reporter, provides detailed insights into this shift ("the Trump administration's war on electric vehicles will allow the auto industry to keep selling big gas powered vehicles for the foreseeable future").

Drivers of the Shift

• Demand Slowdown: There has been a prolonged decline in EV demand over the past year, compounded by the recent dismantling of regulations that previously supported EV production ("the very dramatic and very quick shift has been the dismantling of these regulations").

• Reallocation of Investments: Automakers are reallocating significant investments from EVs to more profitable gas-powered vehicles such as V8 engines, SUVs, and pickup trucks. Ford CEO Jim Farley highlighted this as a "multibillion-dollar opportunity for the company" ("Ford CEO Jim Farley said this is a multibillion dollar opportunity for the company").

Financial Implications

While this strategic pivot promises enhanced short-term profitability due to higher margins on large trucks and SUVs, questions linger about the long-term sustainability of forsaking the growing EV market. Terlip notes that despite the focus on gas-powered vehicles, companies like GM and Ford are not abandoning their EV initiatives entirely and continue to develop new models ("they're still working on EVs. GMs putting out new models").

Balancing Act

Automakers face the dual challenge of managing tariff-induced costs while benefiting from deregulation. While tariffs have imposed financial strains, the relaxation of certain regulations has partially offset these impacts. The broader market dynamics, including robust EV growth in international markets like China, suggest that U.S. automakers must navigate a complex landscape where domestic policy shifts may not align with global trends ("EVs are growing very fast elsewhere. China's BYD has been on a huge roll").

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4. Trump Administration’s Pressure on Public Universities

Targeting University of California

The Trump administration is intensifying its scrutiny of public universities, with a particular focus on the University of California (UC) system. UC President James Milliken announced that the university has agreed to enter discussions with the administration to address allegations of anti-Semitism stemming from campus protests in spring 2024 ("the university agreed to talks with the administration to resolve allegations that... fostered anti Semitism").

• Financial Stakes: UCLA stands to lose $584 million in federal research funds as a consequence of these allegations, following a suspension initiated by the Justice Department ("At risk is $584 million in UCLA's federal research funds").

• Broader Investigations: Other prominent public universities, including Berkeley, UC Irvine, UC San Diego, the University of Virginia, and George Mason University, are also under investigation, indicating a widespread effort to enforce civil rights adherence across major educational institutions ("Two more public universities, the University of Virginia and George Mason University, are also under pressure").

Impact on Academic Freedom and Funding

UC President Milliken argues that the suspension of funds does not address the underlying issue of anti-Semitism, raising concerns about academic freedom and the potential chilling effect on university campuses ("the Trump administration's war on electric vehicles will allow...").

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5. Bureau of Labor Statistics Leadership Change

Concerns Over Data Reliability

The episode underscores anxieties within the economic community following the Trump administration's decision to fire the head of the Bureau of Labor Statistics (BLS). Heather Gillers, WSJ reporter, explains the profound implications of this move:

• Essential Data Services: The BLS is responsible for critical data collection, including the Consumer Price Index (CPI), which measures inflation by tracking prices across a wide range of goods and services ("The Bureau of Labor Statistics is a federal agency that collects all kinds of data").

• Impact on Financial Instruments and Programs: Reliable BLS data underpins numerous financial products and government programs, including Treasury Inflation-Protected Securities (TIPS), 401(k) contributions, health savings accounts, Medicare payments, and Food Stamps ("TIPS, and the IRS relies on Bureau of Labor Statistics inflation data").

• Nonpartisan Expectation: The integrity and nonpartisan nature of BLS data are vital for ensuring trust and consistency in economic assessments and policy-making. The leadership change raises concerns about potential biases and the reliability of future data releases ("the idea that these numbers are totally nonpartisan").

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6. Incident at Fort Stewart Base

Shooting Incident Overview

In the final segment, Alex Osaleh reports on a tragic incident at the U.S. Army’s Fort Stewart base in Georgia:

• Details of the Attack: A suspect, identified as a 28-year-old sergeant, has been taken into custody after injuring five soldiers in a shooting.

• Status of the Injured: All injured personnel are reported to be in stable condition and are expected to recover.

• Motivation: The motives behind the shooter’s actions remain unclear, pending further investigation.

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Bonus Content Announcement

Before concluding, the episode promotes a bonus installment titled "What's News and Earnings," which delves into the food industry's strategies to balance inflation and tariffs while catering to budget-conscious consumers. This episode is available in the listeners' What’s News feed, offering additional insights into the intersection of business challenges and consumer behavior.

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Production Credits

Today's show was produced by Pierre Biennale, with Michael Cosmides serving as the supervising producer. Alex Osaleh extends his gratitude to all contributors and listeners, assuring them of new content available the following morning.

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This episode of WSJ What’s News provides a thorough examination of the current economic and political landscape, highlighting how U.S. tariffs have had a more contained effect than anticipated, the automotive industry's pivot back to traditional vehicles, and the administration’s contentious interactions with public institutions. Additionally, it underscores the importance of reliable economic data amidst leadership changes and reports on significant incidents affecting national security.

Transcript

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[Alex Osaleh]

President Trump plans to meet with President Putin to discuss ending the war in Ukraine. Plus, why have the US Tariffs effects been so mild so far? And for Detroit, gas guzzlers reign supreme once again.

[Sharon Terlip]

They're talking about a world in which they can shift some of these huge investments that they've made in EVs and putting some of that money into gas powered vehicles, V8s or SUVs or pickup trucks.

[Alex Osaleh]

It's Wednesday, August 6th. I'm Al Alex Osalev for the Wall Street Journal. This is the PM edition of what's News, the top headlines and business stories that move the world today. We begin this evening with the latest tariff news. President Trump has signed an executive order imposing an additional 25% tariff on imports from India. That's in response to the country's continued purchases of Russian oil, a practice that India has repeatedly defended. India condemned the new tariffs, calling them, quote, unfair, unjustified and unreasonable. The latest levy, which would go into effect in 21 days, comes on top of the 25% tariff on Indian imports Trump announced last week. India now faces combined U.S. tariffs of 50%. That'll bring it to the same level as the punitive tariffs imposed on Brazil, which take effect today. Last week, President Trump signed an executive order citing legal action against former Brazilian President Jair Bolsonaro and US Tech firms as justification for the levies. Tariffs on scores of other nations go into effect at 12:01am tomorrow. When President Trump first announced his tariffs, he and his supporters claimed that they would slash the trade deficit and bring manufacturing back to the US in droves. Critics said that inflation would skyrocket and that consumers would be faced with shortages. Neither extreme has happened, at least not so far. WSJ economics reporter Gene Whalen joins me now. Gene, what impacts are tariffs actually having?

[Gene Whalen]

What we've seen is inflation has ticked up a little bit because of the tariffs, but it hasn't taken off uncontrollably as some feared. Store shelves are not empty, as some also predicted they would be. And then also we haven't seen a rush of reshoring yet, which is one thing Trump promised. We haven't seen an enormous, enormous drop in our trade deficit. We did see a drop in June, but that was maybe more for a technical reason rather than a sign of a long term downward trend in the trade deficit. One of the main things that we have seen happen is that the government is collecting a lot more money in tariff revenue, and that is something Trump said would happen. It won't, though, be enough to replace income taxes in the way that Trump has suggested that it might.

[Alex Osaleh]

Many US Companies are actually absorbing the extra tariff costs because they don't want to lose customers by hiking their prices unless they absolutely have to. So is that one of the reasons why we haven't seen such dramatic changes?

[Gene Whalen]

Absolutely, yeah. That is probably the main reason. What we've seen so far is that inflation in June rose 2.7% from a year earlier, and that was faster than the rate in May. But what we have seen is US Companies that import goods and have to pay the tariffs are largely absorbing those costs for now and not passing them along yet to customers. That's partly because they stocked up a lot before tariffs got here, so they didn't really need to raise prices right away, and partly because they just don't want to raise prices until they absolutely have to. Most economists believe eventually US Companies will be forced to pass more of the tariff costs along to consumers. It's really just a matter of time before they do that in one way or another. So everyone expects inflation to continue rising due to the tariffs, but perhaps not as sharply or for such a long period as maybe was originally predicted.

[Alex Osaleh]

That was Wall Street Journal economics reporter Gene Whalen. Thanks so much, Gene.

[Gene Whalen]

Sure thing.

[Alex Osaleh]

Major US Stock indexes edged higher today. The Dow closed up about 0.2%, the S&P 500 was up about 0.7% and the Nasdaq about 1.2%. Apple will pledge to invest another $100 billion in U.S. operations at a White House event today, adding to the tech industry's efforts to meet President Trump's request to expand domestic manufacturing. The investment pledge adds to a $500 billion four year commitment Apple made in February that, according to analysts, repackaged much of Apple's existing spending plans in the U.S. a White House spokeswoman called the announcement a win for the US Manufacturing industry. An Apple spokesman declined to comment. President Trump will meet soon with Russian President Vladimir Putin after an offer Russia made during a trip to Moscow by special envoy Steve Witkoff. That's according to a senior administration official. The official added that Trump is open to meeting with both his Russian counterpart and Ukrainian President Volodymyr Zelensky. It isn't clear when or where the meeting would take place. Coming up How American carmakers rediscovered their love for giant gas guzzlers. That's after the.

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[Alex Osaleh]

Boring money moves make kinda lame songs.

[Gene Whalen]

But they sound pretty sweet to your wallet.

[Alex Osaleh]

It BNC bank brilliantly boring since 1865 the Trump administration's war on electric vehicles will allow the auto industry to keep selling big gas powered vehicles for the foreseeable future. Detroit is thrilled US automakers are tearing up the playbooks they created when EVs were in high demand. Sharon Turlop covers the auto industry for the Journal and is here to tell us more. Sharon, how did we get here?

[Sharon Terlip]

Certainly there has been a much slower pickup in demand for EVs and that is something that's been happening over more than the last year. But the very dramatic and very quick shift has been the dismantling of these regulations, some of which have been in effect for years or decades. That really have underpins both automakers plans to build electric vehicles and a shift towards smaller vehicles, maybe limiting bigger SUVs. And so that's been a very quick shift in a matter of recent months.

[Alex Osaleh]

Okay, whole new world for these automakers. How are they actually responding? What are they doing?

[Sharon Terlip]

They're talking about a world in which they can shift some of these huge investments that they've made in EVs. And they are still making EVs. But this is all a matter of proportion and putting some of that money into gas powered vehicles, whether it be V8s or SUVs or pickup trucks or could be smaller vehicles as well. But the real profit is in these very big trucks. There certainly is the question of how many of these can you sell. It's a really competitive segment. The thing with these cars are they are so much more profitable. You don't need to sell as many of them as you do a sedan or a very small SUV to make a good amount of money.

[Alex Osaleh]

So what does this mean really for these companies?

[Sharon Terlip]

Bottom line, in the short term, more profitability, they say. Ford CEO Jim Farley said this is a multibillion dollar opportunity for the company. The bigger questions are long term. And what does this mean long term?

[Alex Osaleh]

Okay, these are more profitable vehicles, but they're also faced with these tariffs. So all told, what is the impact going to be altogether on their balance sheet?

[Sharon Terlip]

The automakers have been taking multibillion dollar hits on tariffs. Different automakers are affected differently. And the Trump administration has made this point also that as much as tariffs are costing the industry, deregulation financially is helping it.

[Alex Osaleh]

Does this mean that these companies are really going to be shifting away from EVs altogether for their sort of long term picture?

[Sharon Terlip]

Certainly the companies are saying, clearly we're still working on EVs. GMs putting out new models. Ford next week on Monday is announcing its EV strategy. So the idea that they're just going to stop building EVs is not that likely. There's also the question of markets outside of the US EVs are growing very fast elsewhere. China's BYD has been on a huge roll. So it's a line that they're walking which is serving a US Market that increasingly isn't looking like markets elsewhere in the world.

[Alex Osaleh]

That was WSJ reporter Sharon Terlip. Thanks so much, Sharon.

[Sharon Terlip]

Thank you.

[Alex Osaleh]

The Trump administration is ramping up its attacks on public universities, setting its sights on the University of California, one of the nation's biggest public school systems. UC President James Milliken said today that the university agreed to talks with the administration to resolve allegations that University of California, California, Los Angeles, fostered anti Semitism during campus protests in spring 2024. At risk is $584 million in UCLA's federal research funds, which Milliken said that the Trump administration suspended following a letter sent by the Justice Department last week. The UC president said that these cuts do nothing to address anti Semitism. The Justice Department said it is still investigating whether other UC campuses, which include Berkeley, UC Irvine and UC San Diego, violated civil rights laws. Two more public universities, the University of Virginia and George Mason University, are also under pressure from the Trump administration. President Trump's firing of the Bureau of Labor Statistics head on Friday has sparked worries among economists about the reliability of its data. That matters because these numbers don't just provide a snap reading of the health of the US Economy. WSJ reporter Heather Gillers says that the BLS data play a crucial role in Americans financial lives.

[Heather Gillers]

The Bureau of Labor Statistics is a federal agency that collects all kinds of data, but one of its most famous outputs is the Consumer Price Index. They collect all kinds of information about prices of everything from eggs to vegetables to car insurance. In order to determine the rate of inflation, which varies considerably over time. So the idea that these numbers are totally nonpartisan means that we can agree on and trust all other calculations based on them. The $2.1 trillion market for inflation protected bonds, treasury inflation protected securities, and the IRS relies on Bureau of Labor Statistics inflation data to determine how much you can contribute to your 401k, how much you can contribute to your health savings account. Medicare, the government health insurance program for elderly people, uses inflation data from the BLS to decide how much you need to pay to be on it. Food Stamps is another program that relies on Bureau of Labor Statistics data.

[Alex Osaleh]

And finally, a suspect is in custody after shooting and injuring five soldiers at the U.S. army's Fort Stewart base in Georgia. A Defense Department official said that the suspect is a soldier. Fort Stewart senior commander said that all the injured are in stable condition and are expected to recover. The motivations of the shooter, identified as a 28 year old sergeant, weren't yet known. And that's what's News for this Wednesday afternoon. In case you missed it, we've got a bonus episode out today in what's News and Earnings. We're looking at the food business and the future of how we eat. We dig into how food companies are balancing inflation and tariffs on one hand, and the need to appeal to budget conscious buyers on the other. You'll find it in your what's News feed. Just before this podcast, Today's show was produced by Pierre Bienname with supervising producer Michael Cosmides. I'm Alex Osaleh for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening. Sam.