US consumers to feel pinch of steep tariffs

United States President Donald Trump has signed an executive order further modifying tariff rates imposed on 69 trading partners, drawing widespread criticism.

The order, set to snap into place on Thursday, imposes "additional ad valorem duties on goods of certain trading partners", with rates ranging from 10 to 41 percent.

Experts warned that these steep tariffs could result in higher inflation, reduced consumer purchasing power and slower economic growth in the US.

The move also risks destabilizing global trade and accelerating the fragmentation of the world economy, they noted.

Yale University's Budget Lab, a nonpartisan US policy research center, said on Friday that consumers face an overall average effective tariff rate of 18.3 percent, the highest rate since 1934.

While the Trump administration claimed foreign exporters will bear the burden, a June survey conducted by the Federal Reserve Bank of Atlanta revealed that businesses expected to transfer around 50 percent of these additional costs to US consumers through price hikes. For example, Adidas cautioned that the US tariffs would cost the company an additional 200 million euros ($231 million) in the second half of the year.

The Budget Lab also predicted that the new tariffs would raise price levels by 1.8 percent in the short term. The added costs could potentially reduce average US household incomes by $2,400 in 2025.

Song Guoyou, deputy director of the Center for American Studies at Fudan University in Shanghai, noted that the high tariff rate was likely to persist throughout Trump's second term, inflicting long-term damage on the US economy.

It will result in a cumulative rise in prices, Song said, adding that the price increase would not be a onetime effect but would trigger a chain reaction.

"The tariff-driven price hikes will begin with direct consumer goods, then extend to production due to tariffs on raw materials and intermediate goods. This eventually will raise overall operating costs in the US, ultimately pushing up service prices," he added.

Song also highlighted a clear link between tariffs and the increasing pressure on private businesses, which has dampened hiring intentions.

Weaker hiring

Data released by the US Bureau of Labor Statistics on Friday showed that US job growth slowed sharply in July, with only 73,000 nonfarm jobs added, significantly below economists' projections. This weaker-than-expected hiring pushed the unemployment rate up to 4.2 percent from 4.1 percent in June.

Luo Zhenxing, an associate research fellow at the Chinese Academy of Social Sciences' Institute of American Studies, said, "Overall, US consumers will undoubtedly face upward price pressures as a result of large-scale tariff increases."

"Inflation's effect on consumers is equivalent to a decline in their overall real income levels, which will further weaken consumer confidence and expectations. Since consumer sentiment is a key economic indicator, inflation could dampen the US macroeconomic outlook," he added.

Luo argued that the high-tariff policy of the US amounted to economic coercion, leveraging its market dominance to compel nations to pay steep costs for access.

"As the world's largest economy, the US' rejection of free trade rules threatens to collapse the entire global trading system," he said.

This signals a shift away from traditional globalization toward a fragmented model, potentially divided along market size, technology access, security concerns and values, Luo said.

He warned that the absence of unified global trade rules will raise transaction costs, increase uncertainty, and ultimately shrink the global market.

Song of the Center for American Studies echoed this concern, arguing that the high tariffs imposed by the US, which damage trade flows, will exert significant downward pressure on global economic growth.

However, Song also noted that US protectionism could spur other nations committed to free trade to forge new regional and bilateral trade agreements as a countermeasure.

Xinhua and Agencies contributed to this story.