Tariffs of 30% on Mexico and European Union

Two of the US’s biggest trade partners have been informed of their tariff fate. 

US President Donald Trump has imposed a 30 percent tariff on imports from Mexico and the European Union starting on August 01, as per his announcement in separate letters posted to his Truth Social platform on Saturday. 

The duties are higher than the 25 percent levy Trump imposed on Mexican goods earlier this year, although products entering the US under the US-Mexico-Canada Agreement are exempted. The EU tariff is also markedly steeper than the 20 percent tax Trump unveiled in April. 

Of course, Mexico roundly criticised what it called Trump's "unfair deal" and insisted its sovereignty was non-negotiable, while the EU have warned that their trade with the US could be effectively wiped out if Trump follows through on his tariff threat. Already, EU's chief, Ursula von der Leyen threatened to take "proportionate countermeasures", if needed. (Anyway, both did say they wanted to keep negotiating with the US.)

And, interestingly, the US government don't seem at all worried about the tariff effects on American consumers. But slowly and surely, the signs are becoming apparent, even if they won't see them.

In fact, inflation heated back up in June, rising to its highest level in four months, as price increases – including those from tariffs – packed a bigger punch. 

Consumer prices rose 0.3% last month, pushing the annual inflation rate higher to 2.7%, the highest since February, according to the latest Consumer Price Index data released Tuesday by the Bureau of Labor Statistics. 

Tuesday’s data came right in line with economists’ forecasts for the headline CPI to rise from the 0.1% monthly and 2.6% annual increases reported in May. They expected higher gas prices would help lift the overall index (which was the case) and anticipated that a broader suite of goods would show the effect of businesses passing along higher import costs to consumers (which was also the case). 

“Tariffs are starting to bite”, Heather Long, chief economist at Navy Federal Credit Union, told CNN in an interview. “It wasn’t as bad as expected, but you can see it in the data”. 

However, inflation has remained relatively tame in recent months due to a variety of factors, including ongoing disinflation trends in housing and other key services, falling gas and travel prices (in part due to weakened demand from uncertainty), and businesses loading up on pre-tariff inventories. 

Economists cautioned that the tariff-related price hikes wouldn’t come quickly nor in one fell swoop and would likely start to hit consumers more as the year went on.

Anyway, Trump disagrees. Actually, he appears to celebrate the data on Tuesday by issuing a social media post trumpeting "Very Low Inflation"! 😮😮😮

"The data proves that President Trump is stabilizing inflation and the Panicans continue to be wrong about tariffs raising prices", White House Press Secretary Karoline Leavitt said in a statement on the same day. 😆😆😆