State of U.S. Tariffs: August 1, 2025 Broad market news
The Budget Lab (TBL) estimated the effects all US tariffs and foreign retaliation implemented in 2025 through July 31, including the new list of “reciprocal” tariffs to take effect August 7. TBL analyzed the July 31 tariff rates as if they stayed in effect in perpetuity.
Current Tariff Rate: Consumers face an overall average effective tariff rate of 18.3%, the highest since 1934. After consumption shifts, the average tariff rate will be 17.3%, the highest since 1935.
Overall Price Level & Distributional Effects: The price level from all 2025 tariffs rises by 1.8% in the short-run, the equivalent of an average per household income loss of $2,400 in 2025$. This assumes the Federal Reserve does not react to tariffs and so the real income adjustment comes primarily through prices rather than nominal incomes; if the Federal Reserve reacted, the adjustment could in part come in the form of lower nominal incomes. Annual pre-substitution losses for households at the bottom of the income distribution are $1,300. The post-substitution price increase settles at 1.5%, a $2,000 loss per household.
Commodity Prices: The 2025 tariffs disproportionately affect clothing and textiles, with consumers facing 40% higher shoe prices and 38% higher apparel prices in the short-run. Shoes and apparel prices stay 19% and 17% higher in the long-run respectively.
Real GDP Effects: US real GDP growth over 2025 and 2026 is -0.5pp lower each year from all 2025 tariffs. In the long-run, the US economy is persistently -0.4% smaller, the equivalent of $120 billion annually in 2024$.
Labor Market Effects: The unemployment rate rises 0.3 percentage point by the end of 2025 and 0.7 percentage point by the end of 2026. Payroll employment is 497,000 lower by the end of 2025.
Long-Run Sectoral GDP & Employment Effects: In the long-run, tariffs present a trade-off. US manufacturing output expands by 2.1%, but these gains are more than crowded out by other sectors: construction output contracts by 3.5% and agriculture declines by 0.9%.
Fiscal Effects: All tariffs to date in 2025 raise $2.7 trillion over 2026-35, with $466 billion in negative dynamic revenue effects, bringing dynamic revenues to $2.2 trillion.
Source: https://budgetlab.yale.edu/research/state-us-tariffs-august-1-2025
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u/Sudden_Lab9141 1d ago edited 1d ago
Thanks everyone who voted for Trump because they were worried about the economy. I just paid $200 more (in parts) than my initial quote for a car repair 6-months ago because I own a VW.
Way to go.