Why haven’t Trump’s tariffs crashed the US economy?
Effects on inflation and employment have not been as bad as feared – but could still materialise with full force in 2026
TL;DR
- Economists predicted significant inflation and falling real incomes due to Donald Trump's tariffs, but these effects were less severe in 2025 than anticipated.
- Factors limiting the immediate impact include data measurement problems from a government shutdown, delayed implementation of some tariffs, and exemptions for countries like Mexico and Canada.
- Companies initially absorbed increased costs and drew down pre-tariff inventories, delaying price hikes for consumers.
- Despite initial delays, the costs of tariffs are rising, and US companies are absorbing them, which is expected to lead to higher prices and lower real incomes in 2026 if tariffs persist.
- The article notes that foreign exporters are not covering the costs of the duties, contrary to claims; US companies are absorbing them.