Tariffs: The price hike you didn't see coming

To some, the term “tariff” might sound like a distant trade policy affecting only international businesses. However, to an Ole Seagull, it is a hidden tax increase that is paid by the American consumer.

And he’s not alone. Economists largely agree that this financial burden is almost entirely passed on to U.S. businesses and, ultimately, to American consumers. A United States International Trade Commission (USITC) report confirms a near-complete pass-through, with steel and aluminum prices rising by 22% and 8%, respectively. One example in the report shows that “washing machine prices increased by about $86 per unit in the months following tariffs.”

Some estimates suggest that these tariff proposals could cost the average American household between $1,600 and $2,000 annually, with some projections ranging even higher, up to $4,900 per year, especially if retaliatory tariffs from other countries are included. Based on current tariff revenue, some economists estimate that this could amount to a tax hike of roughly $1,900 per household.

“Come on Seagull, there have been no big price increases so far with these new tariffs.” “That is true, but we are yet to feel their full impact.”

In anticipation of the “incoming” tariffs, many companies rushed to import and stockpile large quantities of goods. This is allowing them to sell existing inventory at pre-tariff prices for a period, acting as a temporary buffer against the immediate price increases. Additionally, because of the unpredictable and frequently changing nature of tariff policies, some businesses have delayed passing on cost increases. They’ve chosen to “take smaller margins, at least in the short term,” rather than risk losing customers by immediately raising prices, hoping for more stable trade policies or a reversal of duties.

From here on out, it’s just common sense; these are merely temporary measures. Businesses cannot indefinitely absorb these increased costs. Prices will continue to rise as these stockpiles deplete, and companies can no longer delay passing on the burden. The Federal Reserve anticipates more tariff-driven price hikes over the summer, noting that the typical pass-through of these costs to consumers takes time.

Evidence of this emerging inflation is already becoming apparent. The June Consumer Price Index shows sharp price increases in items subject to tariffs, including apparel, appliances, and visual and audio products. Overall consumer prices rose 2.7% in June compared to the same month a year earlier, driven by higher costs for items such as groceries, clothing, furniture and large appliances. Appliance prices specifically jumped for the third consecutive month. Other areas, including toys, shoes and sporting goods, have also become more expensive. Even food items like Mexican tomatoes (subject to a 17% duty) and Brazilian oranges (facing a 50% tariff threat) have seen price hikes, with orange prices jumping 3.5% from May to June.

Research by the Consumer Technology Association (CTA) projects significant price increases under proposed tariff scenarios. For example, under a 10% universal tariff plus a 60% tariff on goods from China, laptops and tablets could increase by 45% (an average of $357 more for a computer), smartphones by 25.8% (an average of $213 more), and video game consoles by 39.9% (an average of $246 more). If tariffs escalate to 20% universally and 100% on China, these increases would be even steeper, with laptops and tablets rising by 68.1% (an average of $540 more for a computer) and smartphones by 36.9% (an average of $305 more).

To an Ole Seagull, these tariffs operate like a rising tide. As the tide comes in initially, the impact is minimal, but gradually, the water level rises, covering more ground and increasing the cost of everything. For American families, it could be a steady erosion of their finances, making everyday life increasingly burdensome.