Why Has the Tariff Effect Been So Mild?
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President Trump plans to meet with President Putin to discuss ending the war in Ukraine. Plus, why have the U.S. tariffs effects been so mild so far?
And for Detroit, gas guzzlers reign supreme once again. They're talking about a world in which they can shift some of these huge investments that they've made in EVs and putting some of that money into into gas-powered vehicles, V8s or SUVs or pickup trucks. It's Wednesday, August 6th.
I'm Alex Osola for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. We begin this evening with the latest tariff news. President Trump has signed an executive order imposing an additional 25 percent tariff on imports from India. That's in response to the country's continued purchases of Russian oil, a practice that India has repeatedly defended. India condemned the new tariffs, calling them, quote, unfair, unjustified, and unreasonable. The latest levy, which would go into effect in 21 days, comes on top of the 25% tariff on Indian imports Trump announced last week. India now faces combined U.S. tariffs of 50%. That'll bring it to the same level as the punitive tariffs imposed on Brazil, which take effect today.
Last week, President Trump signed an executive order citing legal action against former Brazilian President Jair Bolsonaro and U.S. tech firms as justification for the levies. Tariffs on scores of other nations go into effect at 12.01 a.m. tomorrow. When President Trump first announced his tariffs, he and his supporters claimed that they would slash the trade deficit and bring manufacturing back to the U.S. in droves. Critics said that inflation would skyrocket and that consumers would be faced with shortages. Neither extreme has happened, at least not so far. WSJ economics reporter Jean Whalen joins me now. Jean, what impacts are tariffs actually having?
What we've seen is inflation has ticked up a little bit because of the tariffs, but it hasn't taken off uncontrollably, as some feared. Store shelves are not empty, as some also predicted they would be. And then also, we haven't seen a rush of reshoring yet, which is one thing Trump promised. We haven't seen an enormous drop in our trade deficit. We did see a drop in June, but that was maybe more for a technical reason rather than a sign of a long-term downward trend in the trade deficit. One of the main things that we have seen happen is that the government is collecting a lot more money in tariff revenue, and that is something Trump said would happen. It won't, though, be enough to replace income taxes in the way that Trump has suggested that it might.
Many U.S. companies are actually absorbing the extra tariff costs because they don't want to lose customers by hiking their prices unless they absolutely have to. So is that one of the reasons why we haven't seen such dramatic changes?
Absolutely. Yeah, that is probably the main reason. What we've seen so far is that inflation in June rose 2.7 percent from a year earlier, and that was faster than the rate in May. But what we have seen is U.S. companies that import goods and have to pay the tariffs are largely absorbing those costs for now and not passing them along anymore. yet to customers. That's partly because they stocked up a lot before tariffs got here, so they didn't really need to raise prices right away, and partly because they just don't want to raise prices until they absolutely have to. Most economists believe eventually U.S.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:00–5:46
2
What new U.S. tariffs were announced and which countries are targeted?
5:46–10:09
3
Why have President Trump's tariffs so far produced only mild economic effects?
10:09–12:33
4
How much have tariffs contributed to inflation and store shortages to date?
12:33–13:41
Speakers
4 identifiedMore from WSJ What’s News
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