When Donald Trump took office in January 2025, most economists feared that his tariff increases would drive up inflation and reduce real incomes. The average effective tariff on US imports rose from 2% to 18%, the highest since the 1930s, according to the Yale Budget Lab. Yet consumer price inflation remained at 2.7% in November, the same as at the end of 2024, and the unemployment rate only edged up from 4.1% to 4.6%.
One reason for the limited impact is measurement problems caused by a US government shutdown from 1 October to 12 November. The Bureau of Labor Statistics could not collect data as usual, particularly for October, and some figures, such as housing cost inflation reported as zero in November, are questionable. GDP releases have also been delayed.
Second, many of the highest tariffs are not fully in effect. Trump postponed some repeatedly and rolled back others on 14 November because they were driving up grocery prices. He also exempted goods from Mexico and Canada under the US-Mexico-Canada agreement, sparing the integrated North American auto industry from a 25% levy.
Third, companies front-loaded imports after Trump’s election in November 2024, stockpiling goods such as gold and weight-loss drugs before tariffs took effect. The Penn Wharton Budget Model estimates this saved US importers up to $6.5bn.
Finally, the dollar strengthened, offsetting some of the tariff costs for importers. However, economists warn that the worst effects may be delayed until 2026, as the full impact of tariffs on supply chains and consumer prices takes time to materialise.
