Trump's tariffs could squeeze US factories and boost costs by up to
4.5%a new analysis finds
[July 30, 2025] By
JOSH BOAK and PAUL WISEMAN
WASHINGTON (AP) — As President Donald Trump prepares to announce new
tariff increases, the costs of his policies are starting to come into
focus for a domestic manufacturing sector that depends on global supply
chains, with a new analysis suggesting factory costs could increase by
roughly 2% to 4.5%.
“There’s going to be a cash squeeze for a lot of these firms,” said
Chris Bangert-Drowns, the researcher at the Washington Center for
Equitable Growth who conducted the analysis. Those seemingly small
changes at factories with slim profit margins, Bangert-Drowns said,
“could lead to stagnation of wages, if not layoffs and closures of
plants" if the costs are untenable.
The analysis, released Tuesday, points to the challenges Trump might
face in trying to sell his tariffs to the public as a broader political
and economic win and not just as evidence his negotiating style gets
other nations to back down. The success of Trump's policies ultimately
depends on whether everyday Americans become wealthier and factory towns
experience revivals, a goal outside economists say his Republican
administration is unlikely to meet with tariffs.
Trump has announced new frameworks with the European Union, Japan, the
Philippines, Indonesia and Britain that would each raise the import
taxes charged by the United States. He’s prepared to levy tariffs
against goods from dozens of other countries starting on Friday in the
stated range of 15% to 50%.
The U.S. stock market has shown relief the tariff rates aren’t as high
as Trump initially threatened in April and hope for a sense of stability
going forward. Trump maintains the tariff revenues will whittle down the
budget deficit and help whip up domestic factory jobs, all while playing
down the risks of higher prices.
“We’ve wiped out inflation," Trump said last Friday before boarding
Marine One while on his way to Scotland.
But there's the possibility of backlash in the form of higher prices and
slower growth once tariffs flow more fully through the world economy.
A June survey by the Atlanta Federal Reserve suggested companies would
on average pass half of their tariff costs onto U.S. consumers through
higher prices. Labor Department data shows America lost 14,000
manufacturing jobs after Trump rolled out his April tariffs, putting a
lot of pressure as to whether a rebound starts in the June employment
report coming out Friday.
With new tariffs in place, there are new costs for factories
The Washington Center for Equitable Growth analysis shows how Trump’s
devotion to tariffs carries potential economic and political costs for
his agenda. In the swing states of Michigan and Wisconsin, more than 1
in 5 jobs are in the critical sectors of manufacturing, construction,
mining and oil drilling and maintenance that have high exposures to his
import taxes.
The artificial intelligence sector Trump last week touted as the future
of the economy is dependent on imports. More than 20% of the inputs for
computer and electronics manufacturing are imported, so the tariffs
could ultimately magnify a hefty multitrillion-dollar price tag for
building out the technology in the U.S.
The White House argues American businesses will access new markets
because of the trade frameworks, saying companies will ultimately
benefit as a result.
“The ‘Made in USA’ label is set to resume its global dominance under
President Trump,” White House spokesman Kush Desai said.
Still lots of uncertainty, but world economy faces a new toll
There are limits to the analysis. Trump’s tariff rates have been a
moving target, and the analysis looks only at additional costs, not how
those costs will be absorbed among foreign producers, domestic
manufacturers and consumers. Also, the legal basis of the tariffs as an
“emergency” act goes before a U.S. appeals court on Thursday.
[to top of second column] |
 Treasury Secretary Scott Bessent
said in an interview last week on Fox Business Network’s “Kudlow"
show countries were essentially accepting the tariffs to maintain
access to the U.S. market. “Everyone is willing to pay a toll,” he
said.
But what Bessent didn't say is U.S. manufacturers
are also paying much of that toll.
“We’re getting squeezed from all sides,’’ said Justin Johnson,
president of Jordan Manufacturing Co. in Belding, Michigan,
northeast of Grand Rapids. His grandfather founded the company in
1949.
The company, which makes parts used by Amazon warehouses, auto
companies and aerospace firms, has seen the price of a key raw
material — steel coil — rise 5% to 10% this year.
Trump has imposed 50% tariffs on imported steel and aluminum. Jordan
Manufacturing doesn’t buy foreign steel. But by crippling foreign
competition, Trump’s tariffs have allowed domestic U.S. steelmakers
to hike prices.
Johnson doesn't blame them. “There’s no red-blooded capitalist who
isn’t going to raise his prices’’ under those circumstances, he
said.
Trump says no inflation from tariffs, but businesses see higher
prices
The Trump White House insists inflation is not surfacing in the
economy, issuing a report through the Council of Economic Advisers
this month saying the price of imported goods fell between December
of last year and this past May. “These findings contradict claims
that tariffs or tariff-fears would lead to an acceleration of
inflation,” the report concludes.
Ernie Tedeschi, director of economics at the Budget Lab at Yale
University, said that the more accurate measure would be to compare
the trends in import prices with themselves in the past and that the
CEA’s own numbers show “import prices have accelerated in recent
months.”
The latest estimate from the Budget Lab at Yale is the tariffs would
cause the average household to have $2,400 less than it would
otherwise have.
Keeping the economy on a knife's edge
Josh Smith, founder and president of Montana Knife Co., called
himself a Trump voter but said he sees the tariffs on foreign steel
and other goods as threatening his business.
For instance, Smith just ordered a $515,000 machine from Germany
that grinds his knife blades to a sharp edge. Trump had imposed a
10% tax on products from the EU that is set to rise to 15% under the
trade framework he announced Sunday. So Trump’s tax on the machine
comes to $77,250 — about enough for Smith to hire an entry-level
worker.
Smith would happily buy the bevel-grinding machines from an American
supplier. But there aren’t any. “There’s only two companies in the
world that make them, and they’re both in Germany,’’ Smith said.
Then there’s imported steel, which Trump is taxing at 50%. Until
this year, Montana Knife bought the powdered steel it needs from
Crucible Industries in Syracuse, New York. But Crucible declared
bankruptcy last December, and its assets were purchased by a Swedish
firm, Erasteel, which moved production to Sweden.
Smith beat the tariffs by buying a year’s worth of the steel in
advance. But starting in 2026, the specialty steel he’ll be
importing from Sweden is set to be hit with a 50% duty.
“The average American is not sitting in the position I am, looking
at the numbers I am and making the decisions each day, like, ‘Hey,
we cannot hire those extra few people because we might have to pay
this tariff on this steel or this tariff on this grinder,’'' he
said. “I want to buy more equipment and hire more people. That’s
what I want to do.”
All contents © copyright 2025 Associated Press. All rights reserved
 |
