[WASHINGTON, DC] US President Donald Trump’s “Liberation Day” tariff announcement set off the most volatile stretch of his second term, with financial markets descending into chaos, China unleashing retaliatory measures and the president pausing some levies only hours after they took effect.
The whiplash made for a dramatic reminder to shoppers and companies that Trump’s trade policy can change on a dime. That unpredictability, economists said, is likely to be a drag on spending and investing.
And after all the back-and-forth, the average US tariff rate is still as high as it’s been in more than a century – and is nearly 24 percentage points higher than when Trump took office, according to Bloomberg Economics.
“There has never been so much experimentation of tariffs in the past nor this large of scope,” according to Denish Shah, professor of marketing at Georgia State University’s Robinson College of Business. “Consequently, consumers are panicking.”
Friday (Apr 11) brought a fresh signal that consumers were queasy even before Wednesday’s policy shift. US consumer sentiment tumbled to the second-lowest level on record in a University of Michigan survey, as inflation expectations soared to multi-decades highs. That result was based on interviews from Mar 25 through Apr 8, before the change in tack on tariffs.
Jackie Cramer is one shopper who is bracing for financial impact. The 76-year-old retiree in Pittsburgh already bought a new television and sound system ahead of the tariffs and has been stocking up on coffee and canned goods. She’s also worried she’ll have to sell her house and downsize as a last resort.
“I’m watching my money just literally disappear in front of my face,” she said on Wednesday.
Cramer said she thinks the tariffs will cause long-term damage to the country.
“It’s a really difficult time for the American people right now,” she said. ”We have no idea what to expect – it’s like living on a roller coaster.”
Higher costs
Businesses, especially those that source goods in China, are finding it challenging to navigate the turbulence.
Tarptent, a California-based seller of outdoor gear, asked its China-based manufacturer to cancel current purchase orders pending a dramatic decrease in tariffs, said Henry Shires, the company’s president.
The last shipment Tarptent received, at a much lower tariff rate than the at least 145 per cent Trump has imposed on China, raised costs by more than US$41,000.
“We’re really kind of throwing our hands up in the air,” he said.
Michael Simpson, owner of a discount Catholic goods store in Albuquerque, New Mexico, is feeling similarly constrained. Many of his items are manufactured in Asia, and he expects he’s going to have to raise his prices.
“You just cannot get a plastic bottle for holy water that’s not made in China,” he said.
Slowing orders
Sourcing, though, is hardly business owners’ only tariff-related worry.
Mike Harlan is chief executive of the tool and die and machining shop Whitworth Tool, which has about 125 employees in Hardinsburg, Kentucky. He said a major challenge has been quoting prices for customers: The price quotes he gets for the steel he buys are only good for 24 hours, and prices have risen as much as 20 per cent from one week to the next.
Orders have slowed from some customers, Harlan said, especially plants that do metal stamping for automakers, because of the uncertainty about the tariffs.
Harlan is bullish overall about a manufacturing resurgence in the US, and said it’s good the president is taking action – but not good it’s been so disruptive.
“That he’s created near-term chaos, I don’t think anybody is supportive of that I know of, and we have to see how this shakes out,” Harlan said. “I certainly hope it’s for the long-term good for the country as a whole, but we’ll find out.”
On top of Trump’s ever-changing tariff announcements, uncertainty around how and when Congress will enact tax legislation is causing many firms to put their capital expenditure and expansion plans, a key driver of economic growth, on hold.
Multiple surveys of capital-spending intentions – by business groups including the National Association of Manufacturers as well as regional Federal Reserve banks – already show a decline in capital-spending intentions in recent months after initial gains following Trump’s election.
Meanwhile, in a hint of a slowing economic outlook, US crude prices have fallen by more than 15 per cent in April and are trading near a four-year low – a source of frustration for executives in a sector where many backed Trump’s 2024 election bid.
And although inflation data for March showed price pressures eased, economists cautioned that the impact of tariffs has yet to be felt.
“We know firms had been sucking in huge amounts of imports in January and February in advance of tariff hikes, so the shock to consumer goods prices from tariff hikes is not reflected yet,” said Brian Coulton, chief economist at Fitch Ratings.
That economic backdrop underscores the challenge facing Jennifer Nevins and her company Savor, which makes modern organisers for storing documents and keepsakes.
She had spent months developing a new fireproof go-bag, sourced from a manufacturer in China, designed to keep vital documents safe during an emergency. She had planned to sell it for around US$50 – but says the tariffs mean it would need to cost at least US$80.
At that price, she says it will be priced out of the market.
“I invested tens of thousands of dollars in design, sourcing, production, samples for influencers, and digital marketing,” she said. “Tariffs killed the product. I can’t reorder, and all the momentum we worked so hard to build is gone.”
As she figures out next steps, uncertainty is a key obstacle.
“It is the lack of ability to plan,” she says. “You step away from the news for five seconds and you discover there is yet another change,” she said. BLOOMBERG
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