People shop on February 20, 2025 at a supermarket in Manhattan, New York City.
Charly Triballeau | AFP | Getty Images
According to Gregory Daco, chief economist at Ey-Parthenon, consumers will certainly face higher prices as businesses prepare to pass on the rising tariff costs to buyers.
In a survey of 4,000 executives, nearly half said they were willing to pass two-thirds of the tariff surcharge to customers. The poll found that one in 10 participants were willing to take it a step further and put 90% of the extra cost more than 90%.
The executive’s observation is the president’s Donald Trump25% tariff Canada and Mexico Effective Tuesday and imports from China for an additional 10%.
Target CEO Brian Cornell recently said tariffs on Mexican goods could lead Higher agricultural product prices.
Daco told CNBC that the pace of the current trade war under the second Trump administration is surprising and “much faster than we’ve seen before.”
Economists’ benchmark estimates project tariffs will reduce U.S. GDP by 0.6%, assuming China’s tax rate is 20%, while other parts of the world impose an average of 3%.
But, “Our initial benchmark is actually going to implement tariffs later,” Dako said.
Even if the Trump administration’s tariffs only continue and quickly lifted in the short term, uncertainty will continue to erode business confidence and prices cannot be raised at the same rate.
“Businesses today don’t care whether the tariffs are tomorrow or within a week – they are preparing (and) ways to increase inventory and seek different supply chains and alternatives,” Dako said.
“But there is a cost to do so and it is inflation in itself. Uncertainty prevents economic activity,” he added.
Specific, targeted tariffs, Dako said, “very painful at the industry level,” but their impact will take more time to filter to consumers. He added that auto, construction and steel producers may have some inventory at present before increasing consumer costs.
“So, consumers won’t necessarily see the full impact overnight — but soon, they’ll see the price of cars rising — refrigerators, building houses and other things that are happening,” Daco said.
Even if tariffs rise rapidly, he can predict that higher price levels will remain.
“It is true that tariffs can be refunded…this does not mean there is no negatives,” Dako said.
