Cars, coffee and clothing are poised to get pricier with new tariffs

Americans are paying more for appliances, home furnishings, toys and shoes than they were a few months ago, and they could soon face higher prices on more goods as the Trump administration’s latest round of sharper tariffs kicks in.

The newest round of duties took effect at midnight Thursday, lifting the average U.S. tariff rate to its highest level since the Great Depression. The move solidifies the president’s trade policy after months of negotiations, meaning more manufacturers and retailers are expected to begin raising prices in short order.

“Tariffs have moved from being tentative to permanent — and that changes how American businesses are going to respond,” said Justin Wolfers, a professor of public policy and economics at the University of Michigan. “You’re going to start seeing higher prices as soon as businesses become convinced this will stick around, and that clock starts today.”

The higher tariffs, which businesses — not countries — pay to the federal government to import goods, are as high as 50% for Brazil and India, but just 15% for the European Union and Japan.

For consumers, that escalation is expected to result in higher prices, costing households an average of $2,400 per year, according to estimates from the Budget Lab at Yale University. Americans are likely to face large markups on clothing in the coming months, including a 39% increase in prices for leather shoes and bags, and a 37% rise in clothing costs, the research center found. Even after long-run supply chain adjustments and buying shifts, those prices could remain elevated by nearly 20%.

Food prices, meanwhile, could rise more than 3%, while fresh produce could become 7% more expensive as a result of the Trump administration’s tariffs, the Budget Lab found. The center also expects cars — which often rely on components from several different countries — to get 12% more expensive, adding $6,000 to the price of an average new vehicle.

Although businesses have so far absorbed the brunt of new tariffs, by covering higher costs themselves or relying on earlier stockpiles of inventory to keep them going, that is quickly changing. Major retailers, including Costco, Williams-Sonoma and Target, that loaded up on products earlier in the year are beginning to deplete those reserves, analysts say.

“Consumers are going to pay, starting with their morning coffee,” said Robert Blecker, an economics professor at American University, referring to the 50% tariff on coffee from Brazil. “Although it does seem a lot of firms have been eating some of the tariffs by shaving their profit margins and holding the line on prices, that can’t go on forever.”

Walmart, the country’s largest retailer, has begun marking up baby gear, kitchenware and toys. Nike is raising prices on some of its shoes, and many others are beginning to warn consumers that price increases are around the corner. Procter & Gamble, the maker of Tide laundry detergent, Pampers diapers and Oral-B toothbrushes, said it would start raising prices in August on some products by about 2.5% to help offset $1 billion in tariff costs this year.

Sharon Azula, who owns a company that sells plush toys and books, had enough inventory to fill orders through much of this year. But now she is preparing to stock up for the holidays, which means she will have to pay an extra 30% on merchandise from China, translating to markups for customers. Adding to the uncertainty: Ongoing trade talks between the U.S. and China.

“We know we’re going to have to raise our prices at some point,” said Azula, who founded the Tooth Brigade with her husband in 2019. “If our $16 plush suddenly costs more than $20, are consumers still going to buy it? We can’t pay for the increase ourselves, but we also don’t know if we can keep moving forward with our business.”

The toy industry, which imports more than 75% of its products from China, has been among the first to pass on higher costs from the president’s trade war. Toy prices rose by 3.2% between April and June, far outpacing overall inflation of 0.4% in that period, federal data shows.

The president says higher tariffs are needed to combat other countries’ unfair trade practices, which have hollowed out American manufacturing and cost millions of factory workers their jobs. By erecting new barriers to foreign products, Trump aims to promote domestic manufacturing while ushering in what he calls a new “Golden Age.”

Yet, for products like toys, moving manufacturing out of China is not realistic, said Greg Ahearn, president and chief executive of the Toy Association, a trade group. Not only is labor cheaper in China, but for decades, the country also has built up an infrastructure of “manufacturing expertise and the ethical manufacturing process at the factories,” he said. Everything from final packaging to materials such as springs, motors and plastic parts “can’t be replicated here in the U.S.”

An analysis of recent prices from the country’s four largest retailers shows that goods from China have gotten roughly 4% costlier since the Trump administration’s first tariffs took hold this year, according to Alberto Cavallo, a professor at Harvard Business School and co-director of its Pricing Lab. He expects those costs to be up about 10 percent by the end of the year.

Americans now face an overall average effective tariff rate of 18.6%, the highest since 1933, according to calculations from the Budget Lab.

“We had 2 to 3% average tariffs at the beginning of this year,” said Şebnem Kalemli-Özcan, an economics professor at Brown University. “It is foolish to think there isn’t going to be any economic impact, or that this is going to be all pink and rosy for the American people.”

Economists are just beginning to understand how new trade policies are affecting prices, consumer demand and business decisions across the country. The latest data points to slowing economic growth in the first half of the year, as well as pullbacks in business spending, hiring and investment. Households, too, are holding tight as they wait to see how things unfold.

Still, inflationary effects have so far been limited to specific categories and have yet to translate to higher across-the-board prices for many families. Some of the administration’s most dramatic proposals, including tariffs of 100% on chips and semiconductors, and up to 145% on Chinese imports, are still in the air.

Carmakers have so far shouldered much of import costs themselves instead of passing them onto consumers. General Motors last month said tariffs had cost the company more than $1 billion in the latest quarter, cutting into its profit margins and prompting the company to move some operations to the United States. The cost of a new vehicle in June rose 1.2% year-over-year to $48,907, below the average 10-year increase of 3.9 percent, according to Kelley Blue Book.

But the new round of tariffs is expected to make cars pricier, especially those assembled in Mexico and Japan. Consumers will pay an extra 9%, or $3,010, for cars assembled in Japan, including for some Toyota models, such as the Prius and the 4Runner, according to Jonathan Smoke, chief economist at Cox Automotive. Cars assembled in Mexico will see the highest price hikes — about 10 percent, or $3,550 — according to Cox. Those include the Honda Fit, the Chevrolet Equinox and the Ford Maverick.

In upstate New York, gear manufacturer Gear Motions began raising prices to offset tariffs earlier this year. Although imports make up just 5% of the company’s business, trade uncertainty has complicated just about every part of the firm’s operations, President Dean Burrows said. The company’s gears are used in air compressors, superchargers and car transmissions.

Anxious customers are buying less. And it has gotten harder to sell his U.S.-made products overseas; international inquiries have dried up by about 50%, he said, as buyers in other countries look for ways to bypass American manufacturers.

“We’re a 140-year-old company and have survived many ups and downs, but the uncertainty right now is what’s unprecedented,” he said. “We have precision gears on the ocean, coming from Italy and I still don’t know whether I’ll have to pay a 15% tariff, or 27.5%. But either way, we have no choice: We’ll pay it, and we’ll pass it on.”