What have tariffs really done to the US economy?

Soon after Donald Trump returned to the White House in January, he began raising tariffs, brushing off warnings from economists and businesses about the risks of economic damage.

 He started with Mexico, Canada and China, then targeted steel, aluminium and cars, and finally in April, on what he called "Liberation Day", unleashed a blitz of new taxes on goods from countries around the world.

 The plans had an impact on trade and financial markets. But as worries mounted, Trump quickly suspended his most aggressive plans to allow for 90 days of talks.

 As that 9 July deadline approaches and the president crafts his approach, he will have one eye on the US economy.

 So what has the impact really been?

 The stock market has rebounded

 Although he announced a deal on Wednesday that will see the United States levy tariffs of 20% on Vietnam, Trump's plans included imposing tariffs of 20% on goods from the European Union, 145% on items from China, and 46% on imports from Vietnam. After Trump unveiled the full scope of his plans on so-called "Liberation Day," the US stock market took the most immediate hit, beginning to decline in February and eventually plummeting in April. The S&P 500, which tracks 500 of the biggest companies in the US, dropped about 12% over the course of a week.

 But shares bounced back after Trump rolled back his plans, abandoning steep tariffs in favour of a more easily swallowed 10% rate instead.

 The S&P 500 index is currently up approximately 6% for the year. In the UK and Europe, shares have also rebounded.

 a line chart depicting the S&P 500 index's performance during the time that US President Donald Trump imposed global trade tariffs. At the start of January 2025, the index was 5,882, and rose gradually to a peak of 6,144 on 19 February.  It then fell to 5,522 by 13 March 2025 – a period that coincided with the imposition of tariffs on several countries, and retaliatory tariffs on US goods.  From there, the index rose slightly before dropping sharply to a low of 4,983 on 8 April, shortly after Trump’s announcement of a broad range of global tariffs.  It rebounded to 5,457 the next day, after the president paused many of the tariffs, and broadly has been on an upward path since, reaching 6,275 by 3 July.

 But shares of tariff-vulnerable firms, such as retailers and car companies are still hurting - and there is more risk ahead, as the talks deadline approaches.

 The White House has left its options open, saying both that the deadline is "not critical" and that the president may simply present other countries "with a deal" on that date.

 Liz Ann Sonders, chief investment strategist at Charles Schwab, said the rebound suggested "a lot of complacency" among investors, who risk being spooked again should Trump revive higher tariffs than they expect.

 Trade - at a crossroads

 NurPhoto/Getty Images A cargo ship fully loaded with foreign trade containers leaves the port of Qingdao in Qingdao City, Shandong Province, China, on June 23, 2025NurPhoto/Getty Images

 Trump's tariffs precipitated a rush of goods to the US in the early part of the year, followed by a sharp drop in April and May.

 But zoom out a bit, and US goods imports in the first five months of the year were up 17% compared with the same period last year.

 Ben Hackett of Hackett Associates, which monitors port traffic for the National Retail Federation, stated that the outcome in the months to come will depend on whether Trump extends his pause or revives his more aggressive plans. Mr. Hackett stated, "At this point it's anybody's guess," noting that the circumstance was "in a holding pattern" at the time. "If the tariff freeze disappears and the high tariffs are reimposed then almost certainly we're going to have a short recession," he added.

 Prices - it's too early to say Bloomberg/Getty A customer peruses magnets at a gift store on Wednesday, June 25, 2025, in San Francisco's Chinatown neighborhood, California, United States. Bloomberg/Getty

 In the US, imported goods are estimated to account for only about 11% of consumer spending.

 Trump and his allies have argued that concerns that tariffs, which are currently approximately six times higher than they were at the beginning of the year, will raise Americans' cost of living are exaggerated. They have pointed in part to recent inflation data, which showed consumer prices stepping up just 0.1% from April to May.

 But certain items, such as toys, saw far bigger jumps and many goods facing higher duties have not yet made it to shelves.

 Instead of alienating customers with an abrupt increase, businesses, particularly those supported by substantial profits, may choose to spread the increases out over time. Despite pressure from the president to "eat the tariffs", economists still widely expect customers to pay for them eventually.

 "If you're not digging more into the data you would think, 'nothing to see here' from an inflation standpoint," says Ms Sonders.  "However, it's too soon to hang the victory banner at this point." Consumer spending is slowing

 Economic sentiment in the US started falling earlier this year, as Trump began to set out his tariff plans.

 But political views play a big role in shaping opinions on the economy, so whether the worries would actually lead households to clamp down on spending over the long term remained a matter of debate.

 We are now starting to see signs of pullback: retail sales dropped 0.9% from April to May, the second month in a row of decline.  It was the first back-to-back fall since the end of 2023.

 Overall consumer spending grew at the slowest rate since 2020 in the first three months of the year, and slipped unexpectedly in May, the most recent month for which data is available.

 But while growth is still expected to slow significantly compared with last year, most analysts say the economy should be able to escape a recession - so long as the job market continues to hold up.

 Though layoff notices have been pacing higher, for now, unemployment remains low, at 4.2%.  Job creation last month continued at a pace similar to the average over the last 12 months.

 "We're sort of in this stall mode right now in the economy, a kind of wait-and-see mode, that is driven by pretty grave uncertainty and the instability in policy," Ms Sonders said, noting that many firms were responding with a self-imposed "time-out" on hiring and investment.

 The economy is unlikely to escape unscathed, she warned.

 "It's hard to lay out a scenario of a pickup in growth from here," she said.  "The bigger question is whether it will just be a softer economy or a bigger slide,"