Analysis shows US tariffs would cost American employers US$82b

An analysis finds a critical group of employers in the United States would face a direct cost of US$82.3 billion from US President Donald Trump’s current tariff plans, a sum that could potentially be managed through price hikes, lay-offs, hiring freezes or lower profit margins.

The analysis by the JPMorganChase Institute is among the first to measure the direct costs created by the import taxes on businesses with US$10 million to US$1 billion in annual revenue, a category including roughly a third of private-sector US workers.

These companies are more dependent than other businesses on imports from China, India and Thailand — and the retail and wholesale sectors would be especially vulnerable to the import taxes being levied by the Republican president.

The findings show clear trade-offs from Trump’s import taxes, contradicting his claims that foreign manufacturers would absorb the costs of the tariffs instead of US companies that rely on imports. While the tariffs launched under Trump have yet to boost overall inflation, large companies such as Amazon, Costco, Walmart and Williams-Sonoma delayed the potential reckoning by building up their inventories before the taxes could be imposed.

The analysis comes just ahead of the July 9 deadline by Trump to formally set the tariff rates on goods from dozens of countries. Trump imposed that deadline after the financial markets panicked in response to his April tariff announcements, prompting him to schedule a 90-day negotiating period when most imports faced a 10 per cent baseline tariff. China, Mexico and Canada face higher rates, and there are separate 50 per cent tariffs on steel and aluminium.

Had the initial April 2 tariffs stayed in place, the companies in the JPMorganChase Institute analysis would have faced additional direct costs of US$187.6 billion. Under the current rates, the US$82.3 billion would be equivalent on average to US$2,080 per employee, or 3.1 per cent of the average annual payroll. Those averages include firms that don’t import goods and those that do.

Asked on Tuesday how trade talks are faring, Trump said: “Everything’s going well.”

One signatory

The president has indicated he’ll set tariff rates, given the logistical challenge of negotiating with so many nations. As the 90-day period comes to a close, only the United Kingdom has signed a trade framework with the Trump administration. Trump announced on Wednesday he’d reached a deal with Vietnam, while India has signalled that it’s close to agreeing on a trade framework.

Trump said on his social media site that Vietnam will pay the US a 20 per cent tariff on all goods sent “into our territory” and a 40 per cent tariff on any trans-shipping, which usually means exports that come from China but pass through Vietnam to dodge tariffs on Chinese goods.

In return, Vietnam will grant the US “total access” to its market for trade, Trump said, meaning “we will be able to sell our product into Vietnam at zero tariff”. He added he thinks SUVs “will be a wonderful addition to the various product lines within Vietnam”.

There’s a growing body of evidence suggesting more inflation could surface. The investment bank Goldman Sachs said in a report, it expects companies to pass 60 per cent of their tariff costs onto consumers. The Atlanta Federal Reserve has used its survey of businesses’ inflation expectations to say companies could, on average, pass along roughly half their costs from a 10 per cent tariff or a 25 per cent tariff without reducing consumer demand.

The JPMorganChase Institute findings suggest the tariffs could cause some domestic manufacturers to strengthen their roles as suppliers of goods. But, it noted, companies need to plan for a range of possible outcomes, and wholesalers and retailers already operate on such low profit margins, they might need to spread the tariffs’ costs to their customers.

The outlook for tariffs remains highly uncertain. Trump had stopped negotiations with Canada, only to restart them after the country dropped its plan to tax digital services. He similarly on Monday threatened more tariffs on Japan unless it buys more rice from the United States.

US Treasury Secretary Scott Bessent said on Fox News Channel’s ‘Fox & Friends’ on Tuesday, the concessions from the trade talks have impressed career officials at the Office of the US Trade Representative and other agencies.

The treasury secretary said the Trump administration plans to discuss the contours of trade deals next week, prioritising the tax-cuts package passed on Tuesday by the Republican majority in the Senate. Trump has set a July 4 deadline for passage of the multitrillion-dollar package, the costs of which the president hopes to offset with tariff revenues.

AP