Trump’s tariffs threaten to end quarter-century era of cheap goods for US consumers

Globalization’s effect on prices

Should they remain in place, such high duties would reverse decades of globalization that helped lower costs for American shoppers.

Other trends, including factory automation and technological innovation, particularly in electronics such as TVs, have also brought down prices. But imports help keep prices in check, economists say, partly because of lower labor costs overseas and because increased competition in the U.S. market forces American companies to be more efficient.

“Freer trade has helped moderate inflation over the long term,” said Scott Lincicome, a trade analyst at the libertarian Cato Institute. “If we are entering a more restricted supply side … then you’re likely to see more expensive stuff,” Lincicome said.

Bank of America estimates that the new duties could raise car prices an average of $4,500, even assuming that automakers absorb some of the tariffs’ impact. Such an increase would follow sharp price hikes of the past few years that have left the average price of a new car at a painful $48,000.

Aaron Rubin, CEO of ShipHero LLC, which provides software for merchants to help book shipments and track order deliveries, said his data indicates that retailers are already starting to raise prices to get ahead of the tariffs.

ShipHero’s data captures prices on several million products equivalent to about 1% of overall U.S. e-commerce sales. Prices rose 3.9% on Sunday and Monday on a variety of goods compared with the week before Trump announced more tariffs, Rubin said.

A long streak of low prices

After the double-digit inflation of the 1970s was defeated in the early 1980s, inflation still regularly topped 4% yearly until the mid-1990s, when freer trade and globalization began to intensify. From 1995 through 2020, it averaged less than 2.2%.

American shoppers reaped the benefits. Average clothing costs fell 8% from 1995 through 2020, at the same time that overall prices rose 74%, according to government data. Furniture costs were roughly unchanged. The average price of shoes rose just 10%.

Trump administration officials have at times acknowledged the prospect of higher prices from the tariffs.

In a speech last month to the Economic Club of New York, Treasury Secretary Scott Bessent said, “Access to cheap goods is not the essence of the American dream.”

The administration’s willingness to downplay the allure of cheap goods is a risky move, coming after the worst inflation spike in four decades from 2021 to 2023. The jump in prices for essentials such as groceries, gas and housing soured many voters on the economy under former President Joe Biden, despite low unemployment.

According to AP VoteCast, a nationwide survey of voters last November, about half of Trump’s voters said the high price of gas, groceries and other goods was the single most important factor in their vote. Another 43% of Trump voters said it was an important factor, even if it was not the most important consideration.

Some consumers say they are willing to pay more for U.S. goods.

Alisha Sholtis, 38, a nurse-turned-social media influencer, used to shop heavily on China-founded fast-fashion e-commerce site Temu, scooping up polyester tops and dresses for $5 to $25 and grabbing cheap electronics and toys. Products from Temu will now face huge new tariffs.

Yet Sholtis, who lives in Davison, Michigan, said she got tired of the clothes that fell apart after one washing and the toys that broke easily. She now shops elsewhere.

She applauds Trump’s goal of bringing some manufacturing back to the U.S. because she feels the move will lead to better quality. And she said she wouldn’t mind paying higher prices as a result.

“I would buy less of more higher quality things,” she said.

Kevin Hassett, Trump’s top economic adviser, acknowledged Sunday that “there might be some increase in prices” from the president’s tariffs.

But he noted that there have been trade-offs from globalization: “We got the cheap goods at the grocery store, but then we had fewer jobs,” he said on ABC’s “This Week.”

Yet many industries will find it hard to shift much production back to the U.S. in the face of the tariffs, particularly since the scope of the duties has been changing frequently. With duties on Chinese goods so much higher than in the rest of the world, many Chinese products will likely be routed through other countries, such as Vietnam, and pay a lower duty, economists say.

Shannon Williams, CEO of the Home Furnishings Association, a furniture trade group, said it can take years to set up a factory in the U.S. It’s not clear if there would be enough workers either, given the low U.S. unemployment rate of 4.2%.

And the most innovative furniture makers in the U.S. are using technology to reduce their labor needs. “They’re going through it and completely automating their assembly line,” she said.

China is the United States’ third-largest trading partner, and the U.S. imported more than $60 billion worth of iPhones and other mobile phones from China last year.

China also exported 1.2 billion pairs of shoes to the United States, according to the Footwear Distributors and Retailers of America. About 26% of U.S. clothes were imported from China in 2023, one study found, and about 80% of U.S. toys.

Williams said furniture prices likely won’t rise much anytime soon because most companies now import from other Asian nations, such as Vietnam or Malaysia.

Yet “globalization has definitely helped bring costs down,” she said. “There’s a reason you could buy a $699 sofa in 1985 and buy a $699 sofa today.”

D’Innocenzio reported from New York. Associated Press Writer Linley Sanders also contributed to this report.

Originally Published: April 10, 2025 at 1:44 PM MDT