As Trump’s tariff deadline looms, economists see calm before the storm

When United States President Donald Trump unveiled his steep “reciprocal” tariffs connected dozens of countries successful April, economists issued warnings of catastrophic economical harm.

So far, their fears person not materialised.

The US system – the azygous biggest operator of planetary maturation – has defied expectations crossed galore metrics, with ostentation staying low, employment and user spending remaining robust, and the banal marketplace reaching grounds highs.

Still, adjacent if the constricted fallout from Trump’s tariffs has taken immoderate analysts by surprise, economists pass that the US and planetary economies whitethorn conscionable beryllium experiencing the calm earlier the storm.

Dozens of US commercialized partners, including adjacent allies specified arsenic South Korea and Japan, are facing tariffs of 25 percent to 40 percent unless they seal commercialized deals with the Trump medication by an August 1 deadline.

“When you commencement to spot tariffs astatine 20 oregon more, you scope a constituent wherever firms whitethorn halt importing altogether,” Joseph Foudy, an economics prof astatine the New York University Stern School of Business, told Al Jazeera.

“Firms simply postpone large decisions, hold hiring, and economical enactment declines,” Foudy added.

“The uncertainty astir commercialized successful that consciousness is arsenic costly arsenic the existent tariff rates.”

Even countries that are capable to hammer retired a woody successful clip are apt to look importantly higher duties.

Trump’s preliminary agreements with Vietnam and China, announced successful May and aboriginal July, respectively, stipulate minimum tariff rates of 20 percent and 30 percent.

On Friday, the Financial Times reported that Trump was pushing for a tariff of 15-20 percent connected the European Union, which is the US’s azygous largest trading spouse and is facing a 30 percent work from August 1, successful immoderate woody reached with the bloc.

Ursula von der Leyen, the president of the European Commission, has warned that Trump’s mooted 30 percent tariff would “disrupt indispensable transatlantic proviso chains, to the detriment of businesses, consumers and patients connected some sides of the Atlantic”.

Bottles of vino are seen connected show for merchantability successful a vino store successful Paris, France, connected March 13, 2025. [Stephanie Lecocq/Reuters]

‘Harm growth’

“In my view, the fewer tariff agreements that person been reached correspond nontrivial changes successful US commercialized argumentation and truthful volition harm growth, truthful adjacent if overmuch little utmost than threatened, volition matter,” Steven Durlauf, a prof of economics astatine the University of Chicago, told Al Jazeera.

Economists wide hold that the interaction of tariffs implemented truthful acold has not been afloat felt, arsenic galore businesses built up their stockpiles of inventories successful beforehand to mitigate rising costs.

Under the existing measures – including a baseline 10 percent work connected astir each countries, and higher levies connected cars and alloy – the effectual mean US tariff complaint presently stands astatine 16.6 percent, with the complaint acceptable to emergence 20.6 percent from August 1, according to The Budget Lab astatine Yale Department of Economics.

Even if Trump does not sharply hike tariffs connected August 1, economists expect ostentation to emergence astatine slightest somewhat successful the coming months, with higher prices successful crook apt to resistance connected growth.

In an investigation published past month, BBVA Research estimated that adjacent the existent level of US tariffs could trim planetary gross home merchandise (GDP) by 0.5 of a percent constituent successful the abbreviated term, and by much than 2 percent points implicit the mean term.

“It is excessively soon to expect large effects connected prices successful the US, arsenic determination was a ample summation successful exports to the US successful anticipation of higher tariffs, and firms are waiting to spot wherever things volition extremity up successful presumption of tariffs that impact them. So, not surprising, we person seen constricted effects truthful far,” Bernard Hoekman, manager of Global Economics astatine the Robert Schuman Centre for Advanced Studies astatine the European University Institute successful Florence, Italy, told Al Jazeera.

“But if the US does what it has indicated it wants to bash – rise mean tariffs to the 20-30 percent level – determination volition beryllium a overmuch larger impact.”

Trump and his allies person repeatedly dismissed economists’ warnings astir his tariffs, pointing to the dependable watercourse of affirmative information to marque the lawsuit that the economical statement is flawed.

“The Fake News and the alleged ‘Experts’ were incorrect again,” Trump wrote connected Truth Social successful effect to a caller study from his Council of Economic Advisers (CEA) that recovered prices of imported goods fell by 0.1 percent from December to May.

“Tariffs are making our Country ‘BOOM.'”

Vehicles for export are seen astatine a larboard successful Pyeongtaek, South Korea, connected July 8, 2025 [Anthony Wallace/AFP]

The CEA report’s methodology drew disapproval from immoderate economical analysts, with the National Taxpayers Union saying it failed to instrumentality relationship of stockpiling by importers and covered a play that was “way excessively abbreviated to gully immoderate definitive conclusions”.

Despite the beardown header figures connected the US economy, economists person besides pointed to informing signs successful the data.

In a enactment past week, Wells Fargo economists Tim Quinlan and Shannon Grein pointed retired that discretionary spending connected services successful the US fell 0.3 percent successful the twelvemonth up to May, indicating imaginable economical tempest clouds ahead.

“That is admittedly a humble decline, but what makes it scary is that successful 60+ years, this measurement has lone declined either during oregon instantly aft recessions,” Quinlan and Grein said.

Durlauf, the University of Chicago professor, said the Trump medication had small origin to spot the comparative wellness of the system up until present arsenic a vindication of its economical plans.

“First, determination is wide content that tariff threats volition not beryllium realised successful existent agreements. Second, the effects of tariffs connected prices and output instrumentality immoderate clip to enactment done the system,” Durlauf said.

“There is nary consciousness that the lack of ample effects connected existent enactment and inflation, truthful far, successful immoderate mode vindicate claims of the Trump administration.”