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President Donald Trump has made a number of changes to U.S. commerce this week that may have a lasting impact on your economy and pocketbook.
On Wednesday, Trump announced a 10% base tariff and additional import taxes on a country-by-country basis. These broad-based taxes are in addition goods-specific duties on steel, aluminium, and automobiles. The president claimed that the tariffs would bring manufacturing and investment back to the country as well as raise revenue for the federal governments.
Here are three graphs to help you understand the new tariff policies and quantify their magnitude.
This is the Highest Tariff Rate Effective in More than a Century
The effective rate of tariffs measures the total tax levied on imported goods. It's a good way to account for all tariff policies that a country has in place.
In the U.S., that rate was 2.4% when Trump took office earlier this year. Economists used different calculations to determine the average effective rate following the announcement of “reciprocal tariffs” this week. Most ranged between 20% and 30 %.
Researchers at the Yale Budget Lab said this week that the effective tariff rate would rise to over 22% once all tariff measures announced were implemented. This includes the 11,5% that is a result of the new tariffs announced this week, which is the highest rate since 1909.
Prices on Goods Are Likely to Increase
Most economists are in agreement that tariffs increase the cost of goods for Americans.
Importers often pass on higher costs to consumers because they are taxed more heavily when goods are imported into the country. Yale Budget Lab estimates the average household could be charged $3,800 annually by tariffs.
Leather goods and clothing are expected to see the biggest increases.
Tariffs could have a long-term impact
The tariffs are not only likely to increase prices but also slow down the economy and increase the risk of a recession.
Trump has said he is ready for temporary pain, as the global economic system adjusts to his policies. But economists believe the effects could last a long time. According to Budget Lab, tariffs may have a negative impact on the gross domestic product of the country for many years.
