From Reuters:
“U.S. President Donald Trump on Friday rolled back tariffs on more than 200 food products, including such staples as coffee, beef, bananas and orange juice, in the face of growing angst among American consumers about the high cost of groceries.
“The new exemptions – which took effect retroactively at midnight on Thursday – mark a sharp reversal for Trump, who has long insisted that the sweeping import duties he imposed earlier this year are not fueling inflation.”
From the New York Times:
“The exemptions … were applied to certain ‘reciprocal’ tariffs that President Trump announced on other countries’ exports in April. They walk back one of the president’s signature policies, the sweeping tariffs that he has suddenly paused, raised and lowered in recent months, causing chaos for trading partners and international businesses.
“The White House said the tariffs were no longer needed, given the substantial progress it had made in its trade negotiations, including more than a dozen ‘framework deals,’ final trade agreements and investment agreements. The United States said this week that it had agreed to deals with Switzerland, Argentina, El Salvador, Guatemala and Uruguay that would open up those markets for U.S. business.
“But the steps also appear motivated by rising concern inside and outside the White House about consumer prices. Though Mr. Trump campaigned on lowering the price of groceries, continued elevated inflation has weighed on his approval ratings, and concerns about affordability helped propel Democrats to wins in elections across the country last week.”
The Wall Street Journal quantifies the price increases: “Average retail prices for ground roast coffee are up more than 40% in the past year as of September, according to the Bureau of Labor Statistics. Average retail prices for ground beef and bananas have increased by 11.5% and 8.6% since September 2024 – well ahead of the overall inflation rate of about 3%.”
KC’s View:
Let’s be clear. I was very critical of the tariffs from the get-go. So some of this won’t be a surprise to MNB readers.
To begin with, it seemed very clear from the beginning – keeping in mind that I’m not an economist – that tariffs are a tax that impact people and companies on this end of the supply chain. Raised prices on companies outside the US get passed along; in some cases, companies absorbed the increases, while in others they passed along the hikes to shoppers, and this was expected to happen more often over time.
Some people call it inflation. Some just call it stuff that is more expensive. Either way, consumers end up feeling the pain. As time went on, something had to give. That’s what happened last week.
The Trump administration is learning something that the Biden administration learned just a few years ago – inflation can be difficult to manage, and it is worse when you deny the fact that shoppers have to spend more money at the store. As I said, I’m no economist, but from what I’ve absorbed, so much of this seems traceable back to the amount of stimulus money injected into the economy during Covid, first by Trump and then by Biden. We’re all still recovering.
The problem is that tariffs exacerbated the problem. And the decision last week to roll back tariffs on so many products is a tacit admission that tariffs help to drive up prices, despite the fact that so many in power had said for so many months that this was not the case.
I’m glad that these tariffs are being exempted, and I hope that the sigh of relief being let out by retailers, manufacturers and consumers will lead the administration to roll back more of them.
Even as the debate about tariffs was unfolding, I argued here – relentlessly – that it was critical for business to be transparent with shoppers about why prices were going up. If tariffs were the cause, it was important for retailers to own the narrative by communicating it effectively to shoppers. Now, as public policy seems primed for a shift in approach to tariffs, I think that as prices come down, retailers ought to be equally transparent about the what and the why.
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