Bloomberg Audio Studios, podcasts, radio news. For most of the past year, we've been talking about tariffs a lot in the future. Tense tariffs have been coming and then maybe not. They've been on and off, up and down, calculated and recalculated.
President Trump rolling out a set of tariffs schedule to start April second.
Facing a global market meltdown, President Donald Trump has a promptly backed down on his tariffs on most nations. President Trump is hinting there may be another round of reversals on his tariffs.
But now they're here. According to Bloomberg Economics estimates, the average US tariff rate is sent at over fifteen percent, compared to just over two percent last year, and that's brought up new, more immediate questions like how are tariffs actually getting collected, how much money are they bringing in, and crucially, who is paying for them. To answer these questions, I called Stacy Vanocksmith, a financial journalist and the co host of Bloomberg Business Weeks, Everybody's Business podcast.
If I can tell you how much time recently I have spent trying to track down what tariffs are associated with what countries at a particular time, it would be a very long story.
Stacy's been speaking with importers, exporters, business owners, and economists to try to understand what these higher tariff levels really mean for global trade and how companies are deciding whether to eat those costs or to pass them on.
I talked to a customs broker here in New York who said at customs brokers just kind of a middleman between an importer and an exporter. And he said he would just cover the cost often of the tariffs because they were so low, they would just throw it in for their client.
That's not so easy anymore. I'm Sarah Holder, and this is the big take from Bloomberg News today on the show, how much money Trump's tariffs have generated for the US government so far, and what we know about who's picking up the tap. At its most basic level, a tariff is really just a tax on imports or exports. It's almost always paid on imports, though, and it's calculated as a percentage of the imported goods value. The rate depends
on the product and its country of origin. Right now, for example, a containership from the UK would face a ten percent tariff. Germany or South Korea would be hit with a fifteen percent tariff Bloomberg. Stacy Vanicksmith says, the tariff is collected when the goods hit US soil.
So at the airport or the ship port.
It is a form that looks like a tax form, and the custom broker fills it out, the importer of record fills it out, they pay the tariff, and it is paid where the goods come in to the US.
I asked Stacy to break it down at the level of a single shipping container.
So let's say the ship comes in and it's full of a million dollars worth of lobster tails, and the tariff is twenty percent. So essentially, when the ship gets there, you have a customs broker who's sort of tracking it. They're not necessarily physically there to meet it, but they're tracking the shipping container, so the shipping container gets there. When it gets there, the customs agent fills out a form that looks a lot like a tax form. It sort of looked like a W nine if you've ever
seen one of those. I was really hoping it would be splashier or sexier than it was, but it just looks like a line on a tax form. Unfortunately, but that is where the tariff is calculated. It gets calculated right there based on the declared value of the goods getting shipped there. And the way that it works is the company basically says, yes, we will pay that amount and then has a certain amount of time I believe it's two weeks to pay that tariff to get that
money to the government. So they have bonds that sometimes get issued, sort of like a bail bond. And it didn't used to be a big deal at all, but now, of course, the expenses can be really big and they're changing all the time. So for companies this can be a bigger expense and can really eat into or in some cases, wipe out their profit margins.
Right.
The issue being that these companies don't have all that money potentially on hand to pay the US government, and so they have to take out these bonds.
Yeah, a lot of businesses operate on a really narrow margin. The company I was dealing with specializes in seafood, and a lot of restaurants or supermarkets operate on these really razor thin margins and everything is really perfectly mapped out, and so this really throws a wrench.
Into their operations.
And their expenses, and you know, it's not necessarily that they can't always afford it. It's just it's a total disruption of the way that they did business and cost structure, and it's really throwing everybody for a loop.
The Trump administration says the tariffs raised nearly thirty billion dollars in July, and last week Steven Myron, the chair of President Trump's Council of Economic Advisors, came on Bloomberg TV to project that the tariffs will bring in much much more money for the government over the next decade.
You know, the CBO did a study when the One Big Beautiful Bill was under consideration in Congress, finding that the total effect of the tariffs would be three trillion dollars over the course of a decade. You know, I think that tariff rates have moved a little bit higher since then, and so my team is actually currently crunching through the numbers right now as we speak with the
new tariff rates. But I wouldn't be surprised if the final number is closer to four trillion dollars over a decade instead of three.
The Trump administration has suggested the tariff revenue could help offset the costs of tax cuts in the recently passed Tax and Spending bill, the idea being cut domestic taxes raise import taxes.
The problem is, definitely you can raise money with tariffs, but the amount of money that we'll be coming in from tariffs is just nowhere near the amount of money that would have come in from the taxes on business and the income taxes. It's just not even It's just not even close. It won't come close to replacing it.
The question is who's footing the bill that's next? Now that many of President Trump's so called reciprocal tariffs are in place, the journalist Stacey Vanocksmith says, the key question is who's paying them. The White House has long maintained that foreign companies will foot the bill, but are they.
I talked to economist Justin Wolfers from the University of Michigan, and he said there are three and a half places where the cost of tariffs can end up. One is foreign companies pay for them. Number two is US companies pay for them. Number three is we pay for them. And the half is that stuff just disappears.
We'll come back to the half. In Justin Wolfers, three and a half options in a minute. For now, let's stick with the idea that foreign companies, domestic companies or consumers will pay for Trump's tariffs. And if we start with foreign companies Trump's choice, well, in theory, it might make sense that they could be forced to cover the cost of tariffs.
I mean, you would think, since the US is the top buyer for so many countries and so many companies around the world, that if you said, listen, you got to cut your price by whatever it is, fifteen percent, twenty percent, we won't buy your stuff anymore, that would be an offer that they could not refuse.
The thing is they are refusing it.
There's something called the import price.
Index that's economist justin Wolfers.
And it measures the average price of goods coming into the country before tariffs are charged. Bad news. It's beading exactly flat. What that tells us is that Trump was wrong. Literally, none of it's being paid for by foreign countries.
Which indicates that there are no deals being cut.
Why not, Why isn't that happening?
That's a good question.
I think there could be a lot of things going on. One could be maybe just feeling like we need to change our policy here, like relying on the US so much for where we sell our stuff is just not a good policy going forward. Also, there have been so many changes in the tariffs. I know this from talking
to a lot of US companies too. They don't feel like they know enough to cut a deal even because you know, if you're a foreign company and you cut a deal making up for a twenty percent tariff, and all of a sudden there is an exemption or the tariff gets cut to five percent, it's just really hard for anybody to operate and to make deals, And so I think foreign companies are hesitant to leave money on the table when they just don't know how things are going to pan out.
Which means either US companies or US consumers must be paying for these tariffs right The.
Strange thing is, it doesn't seem like either of those things is happening right now. Inflations been pretty tame, Like I feel like we've all been expecting I personally have been expecting to see inflation prices going up, and that hasn't happened so far.
At least, tariffs haven't significantly bumped up the prices consumers are paying for their tube socks, potato, chips or blonde chairs.
At the same time, companies have been reporting really solid earnings for the most part, and so I was very curious it seemed like that money was just kind of vanishing. One of the economists I talked to was Chad Boundies with the Peterson Institute, and he actually told me he thought that tariffs were in a kind of a liminal space right now, because he was like, listen, Trump campaigned on tariffs. Companies knew this was coming, and they had
months to stockpile things. And in fact, if you look at the data, you can see there's a spike in imports from US companies right before the presidential election and in the you.
Know, the weeks following it.
Companies were preparing for this, and so they were really taking in a lot of goods at a lower price, and so they haven't had to pass those costs on. And then the other thing is companies hesitate a lot
before they passed prices on to consumers. The Pricing Lab at Harvard did a big study back in twenty seventeen in the first round of tariffs, and most companies took an average of six months before they started passing tariff costs along to consumers, and then even a year and a half later, they were still not entirely passing them on because they're worried about losing customers. They're worried about giving competitors an edge. They're worried also about the tariffs
changing so much and how to respond. So I think companies are kind of waiting and seeing, and some companies are eating the cost. You know, we saw GMS earnings come out. Their earnings were down by a billion dollars and they said tariffs were a big part of that. They didn't feel like they could pass the cost on right now.
But there are signs that price increases may already be on the way.
The Pricing Lab at Harvard found that we are actually starting to see the little sprouts of prices rising because of tariffs, especially on things from China. Those are household goods, which are things like linens and carpet and things like that. A lot of those are made in China. Furniture also a lot of furnitures made in China, so things like that. In electronics, a lot of electronics made in China, So the prices there have gone up. They've gone up by
an average of three percent. So the price spike isn't big yet, but it is starting to happen.
And there are other more subtle ways companies can pass costs onto consumers.
Smaller packaging, more air, and our potato chip bags, cheaper thread on our shirt buttons. It gets passed on in some way that basically means that our dollar does not have as much value, does not buy as much.
From inflation to shrinkflation to skinflation. There are lots of ways US consumers might start seeing the cost of the new tariffs passed on to them. But there's one more way US consumers will feel the impact, the third and a half option that economist Justin Wolfers was talking about.
I said this three and a half ways this could play out. The half is you just stop trying. Just don't send the bout. You don't send the bout of it because prices, if they were to be charged, would be so high you wouldn't be able to sell the goods, and so that's a cost as in you end up doing with that, you have a less of selection.
One of the things that can happen is people just stop importing stuff. It's just not worth it, you know. So this is everything from like I don't know.
To what ghost flation? Is that a new one?
Just ooh, I like this appear completely I think TM immediately ghost flation. Actually, ghostflation is fantastic. I love ghost Yes, it is ghost flation. It's and that is when you go to the store and you're like, hey, wait a minute, where's the French cheese that I like or the avocados from Mexico or the sweaters from Switzerland, where like, where's all the stuff and it's just not there.
If tariffs make it too expensive for companies to import a certain product, they might just stop. That means a smaller selection at the store and fewer choices for consumers. So, Sacey, we're in this kind of in between place right now where companies are absorbing what they can for as long as they can. How long can or will they keep doing that?
The liminal space question. I mean, the answer is we don't know. It's very funny. I felt like when I was reporting the story, inflation was a little bit like a monster in a horror movie, where like you didn't know when it was going to show up or how it was going to show up, but you know the ghost was going to come out in some way and it was going to be bad, so I sort of felt like I was tracking this monster around the economy.
It looks like from everything we know from past situations, particularly from the twenty seventeen tariffs, it's about six months before we really start to see the impact. The tariffs get processed pretty slowly through the economy, but then it's kind of steady. So I think we're quite cushioned right now. And you know, who knows also what deals are going to get cut, So I think companies also might have
to take for that reason, to pass things on. It may take a little longer this time, because people want to wait for things to settle down before they make any big company changing moves. You know, if you're running a huge company and the tariffs are up and down by twenty percent inside of a week, which sounds insane, But if you're running a company, the smartest thing to do is wait, even if it costs you, because if you act too quickly, it could cost you even more.
After so much tariff whiplash, it makes sense that companies might be wary of changing their prices too soon, but Stacy says it's unlikely the effects of these new tariffs will completely disappear, even if the next administration has a different trade agenda, because once the tariff genie gets out of the bottle, it's hard to put it back in.
The problem is, as I talked to a bunch of trade economists, you know, whole industries start to get built up around the tariffs, and a bureaucracy builds up around the tariffs, and so the momentum becomes to keep the tariffs in place. It's not as simple as just ending them. It's not as easy as like, Okay, great, so we can get all those toasters coming back into the US that you had now diverted to selling to France. And no, it's not quite so easy because supply chains have shifted,
buying patterns of shifted, prices have shifted. US retailers don't want to charge less at that point either.
So these things come with inertia.
It's not just about perhaps being dependent on some sort of tariff revenue. It's that there's this entire paraff ecosystem that's really hard to unwind.
Yes, yes, and that is one of the big concerns that got expressed to me by a bunch of economists was like well, once this is in place, it's going to be hard to dismantle.
This is the Big Take from Bloomberg News. I'm Sarah Holder. To get more from The Big Take and unlimited access to all of Bloomberg dot com, subscribe today at Bloomberg dot com slash podcast offer. If you liked this episode, make sure to follow and review The Big Take wherever you listen to podcasts. It helps people find the show. Thanks for listening. We'll be back tomorrow