The Post-Election Economy

Will tariffs drive up consumer costs?

BY MATTHEW SHAY

ELECTIONS ARE ALMOST ALWAYS about the economy, and this one was truly a “cost-of-living election.” While the rate of inflation came down last year, the mental and emotional toll of three years of inflationary spikes remains deeply ingrained in the American psyche. Although it’s too soon to predict the election’s long-term economic impact, growth in wages and salaries should support a steady pace of spending.

2025 brings a new administration and a new Congress. President Trump was elected to his second term and the Republican party won control of both chambers in Congress. The National Retail Federation (NRF) is prepared to work with the new administration to advance policy priorities focused on tax, trade, and regulatory reforms that will enhance America’s competitiveness, boost domestic investment, and create jobs.

There will be a renewed focus on trade policy with proposals to establish or expand broad-based, non-strategic tariffs on imports that could reduce consumer spending by as much as $78 billion annually. Since 2018, broad tariffs on Chinese imports have been implemented and expanded under two presidential administrations, costing American importers more than $235 billion in the last six years.

A tariff is a tax paid by the U.S. importer, not a foreign country or the exporter. This tax is ultimately paid by consumers through higher prices. A recent study released by NRF looked at the impact of the proposed universal tariff (10%-20% on all imports) and the proposed 60%-100% tariff on China imports on six key retail categories. In the most extreme scenario, total average tariffs would exceed 50% for all categories examined. This would have a significant and detrimental impact on the cost of a wide range of consumer products sold in the United States, driving prices higher than many customers would be willing or able to pay.

A growing body of economic research concludes that these tariffs would have a net negative impact on the U.S., with households shouldering an additional $7,600 in costs annually. China and other trading partners must live up to their trade commitments, but punishing U.S. consumers, workers, and businesses with non-strategic financial penalties in the form of tariffs is not conducive to American competitiveness. Instead, we should pursue constructive, bi-lateral or multi-lateral engagements with our trading partners to maintain our economic momentum and build on current growth.

Retailers look for ways to diversify their supply chains and provide increased value to their customers. NRF is committed to pursuing a trade policy that holds our trading partners accountable, enhances U.S. competitiveness and protects American households from inflationary price increases on everyday household goods, and will continue leading the retail industry’s voice in these public policy debates.

Matthew Shay is president and CEO at the National Retail Federation.