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President Donald Trump’s decision to enact expansive new tariffs goes against a decades-long global trend of lower trade barriers and is likely, economists say, to raise prices for Americans by thousands of dollars each year while sharply slowing the U.S. economy.
The White House is gambling that other countries will also suffer enough pain that they will open up their economies to more American exports, leading to negotiations that would reduce the tariffs imposed Wednesday.
Or, the White House hopes, more companies—both American and foreign—will reverse their moves toward global supply chains and bring more production to the U.S. to avoid higher import taxes.
But a key question for the Trump administration will be how Americans react to the tariffs. If prices rise noticeably and jobs are lost, voters could turn against the duties and make it harder to keep them in place for the length of time needed to encourage companies to return to the U.S.
The Yale Budget Lab estimates that all the Trump administration’s tariffs together would cost the average household an additional $3,800 this year. The figure includes the impact of the 10% universal tariff announced Wednesday, plus much higher tariffs on about 60 countries, as well as previous import taxes on steel, aluminum and cars. Inflation could top 4% this year, from 2.8% currently, while the economy may barely grow, according to estimates by Nationwide Financial.
And investors turned thumbs down on the new duties Thursday, with the broad S&P 500 index dropping 4.1% in afternoon trading. The Dow Jones Industrial Average plunged more than 1,400 points. The only sector not selling off was consumer staples, which consists of companies that sell basic food stocks.
