When US President Donald Trump imposed the steepest tariffs in nearly a century this April, many economists warned of runaway inflation and a looming recession. Six months later, those fears have not materialised. Inflation, though above target, is milder than expected, and the US economy continues to expand. Analysts now say the tariffs have mattered less than once feared — and helped neither revenues nor the promised manufacturing revival, the Wall Street Journal reported.
Inflation and revenues tell a mixed story
US annual inflation was at 3% in September, still above the Federal Reserve's 2% goal, but far below earlier forecasts. Tariffs did nudge prices higher for apparel and furniture, among other goods, but the effects have mostly been muted. Customs revenues are running below projections, according to Treasury data, with companies' effective tariff rate -- at about 12.5% -- far lower than headline rates averaging above 17%. With loopholes and exemptions, many imports avoid the steepest levies.
Supply chains in motion
To mitigate the costs, firms have reorganised sourcing networks: production has been shifting from China to countries like Vietnam, Mexico, and Turkey where the duties are lighter. Some importers - including large retailers - stockpiled goods ahead of the tariffs, or used bonded warehouses to delay payments. Logistics providers say there is increased interest in free-trade zones too as companies weigh up every possible route to minimise exposure.
Businesses absorb the hit
Analysts estimate US companies absorb 30% to 50% of the tariff costs to shield consumers from sharper price increases. Retailers and automakers, who have healthy margins, have absorbed most of the hit rather than lose demand. Car prices, for example, rose only about 1% from March to September, despite 15% or more levies on imports from a number of countries. Data from Bank of America and JPMorgan show manufacturers absorbing as much as 80% of the tariff costs.
Limited gains for manufacturing
The broader economic benefits that Trump promised have yet to materialize: Treasury Secretary Scott Bessent had forecasted annual tariff revenues between $500 billion and $1 trillion, but the total now looks closer to $400 billion. There are few signs of a major domestic manufacturing boom, meanwhile, even as some small industries benefit from targeted protection.
Consumer strength and remaining risks
High employment and a strong stock market have kept consumer spending, which fuels about 70% of US GDP, resilient. But economists have been warning that delayed price hikes could still push inflation higher next year as firms gradually pass on the costs. Hiring has slowed in some sectors due to trade uncertainty, while business confidence remains uneven.
The bottom line
The tariffs, so far, have failed to trigger economic chaos — or deliver the industrial renaissance the White House envisioned. Instead, US growth has persisted, cushioned by corporate profits and global supply-chain flexibility. The real test may come later, as companies decide how long they can absorb the price of protectionism without passing it on to consumers.
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