Hiltzik Criticizes Trump’s Consumer Tax Policy
This week, Wall Street was keenly anticipating a Supreme Court decision regarding President Trump’s tariffs. Following oral arguments held on November 5, 2023, initial indications suggested a majority of justices were inclined to nullify these tariffs. However, the Court did not render a decision, extending uncertainty over Trump’s key economic policy into late February, as it prepares for a four-week recess.
Impact of Tariffs on American Consumers
Recent findings from the Kiel Institute for the World Economy underscore the negative ramifications of Trump’s tariffs. Contrary to the belief that foreign exporters bear the cost, the study reveals that U.S. consumers are the actual payers. In 2025, the U.S. Treasury garnered $200 billion from these tariffs, equating to a significant consumption tax imposed directly on American households.
Economic Consequences Forecasted
Economists Peter Orszag and Adam Posen suggest that the ramifications could worsen, with inflation projected to surpass 4% by the end of 2026. This prediction represents a stark increase from December’s estimated annual rate of 2.7%. The duo argues that firms will gradually pass along tariff costs to consumers, marking a shift in how these tariffs affect pricing.
- 2025 Tariff Revenue: $200 billion
- Projected Inflation Rate by 2026: >4%
- Current Inflation Rate (December): 2.7%
The analysis by Orszag and Posen indicates that while importers coped with the costs of tariffs in 2025, they are likely to be unable to maintain this coping mechanism into 2026. Businesses have so far incrementally adjusted prices but may find this strategy unsustainable moving forward.
Policy and Market Response
The White House continues to assert that foreign exporters ultimately incur the tariff costs. A spokesperson emphasized that tariffs have risen significantly under Trump’s administration, despite claims that inflation has decreased since the Biden era.
Economic Waste from Tariffs
The Kiel study highlights that 96% of tariff costs were passed on to American consumers. This trend mirrors previous instances, such as during the U.S.-China trade conflict, where U.S. import prices escalated in tandem with tariffs. Notably, foreign exporters have adopted strategies to retain profit margins rather than reduce prices to absorb costs.
| Key Statistics | Details |
|---|---|
| Study Transactions | Over 25 million |
| Total Value of Transactions | Nearly $4 trillion |
| Tariff Impact on U.S. Working Class | 96% of costs borne by consumers |
Tariffs contribute to elevated prices on imported and domestic goods, squeezing American consumers further. The implications of these policies extend beyond short-term economic impacts, potentially altering consumer behavior for years.
Conclusion
As Trump nears the anniversary of his second term, the economic landscape remains strained. With the Supreme Court’s indecision, it appears the detrimental effects of tariffs will linger, leaving American consumers exposed to rising costs and economic uncertainty.
