In April 2025, newly re-elected President Trump introduced a series of new import tariffs targeting a wide range of countries. The most drastic tariffs will be imposed on China, ranging from 10% to 125% on goods. Trump’s administration strives to shift the global trade balance by reducing American reliance on foreign-made goods and stimulating domestic manufacturing.
After Trump’s announcement, the S&P 500 experienced its worst four-day performance since the early COVID-19 pandemic, dropping over 12% and erasing $5.8 trillion in value. This sharp decline was attributed to investor concerns about a potential recession and inflation resulting from the new tariffs.
In response to the stock market’s frenzy, President Trump announced a 90-day pause on most tariffs on April 9, excluding those on China. These policies are not without unintended consequences, raising the costs of everything from fast fashion to luxury goods.
Why should you care?
For uni students, including myself, tariffs can seem distant and too complex for our understanding and should be left to the “experts.” However, I’ve found it very empowering to be well-informed on the financial market. These policies impact what we buy, how much they cost, and our future job prospects. It is important to make conscious choices when spending during economic uncertainty.
What even is a Tariff?
Tariffs act as a tax on goods created in another country. When a domestic country imports electronics or clothes from foreign manufacturers, the domestic buyers must now pay a fee to absorb the import cost.
Historically, the U.S. had relatively low tariffs, with an average rate on imports from China of only 2.5%. In 2018, under Section 301 of the Trade Act, some products began to rise to 15%. In the past, foreign companies absorbed the burden of tariffs by lowering prices, but today, tariffs are passed almost entirely to U.S. firms or consumers. The new tariff announcements will target a broader class of goods, which makes companies less likely to absorb the tariffs in the form of lower profit margins.
How will these tariffs make consumers rethink their purchases?
Implementing high tariffs will force consumers to reevaluate their spending priorities. For example, a shopper who would typically purchase a budget-friendly shirt from a fast-fashion brand may reconsider and choose a more costly and domestic alternative due to the price increase. Families will likely reduce their spending on non-essential items, such as dining out or luxury items, and instead focus on necessities like food, medicine, and housing.
As purchasing habits shift, businesses will feel the impact of lower demand, potentially leading to layoffs and job cuts. This increases unemployment, reducing consumer purchasing power even further. As people spend less, the Federal Reserve may raise interest rates to combat inflation, but this only compounds the issue, making loans and credit more expensive and discourages consumer spending.
Fast Fashion
The fast fashion supply chain has relied on low prices and quick production cycles by relying on exploitative labour and environmental degradation. Conglomerates like Shein and Temu rely on cheap imports from China, and according to Statista, “Shein shipped 28% of its products to the U.S. in 2023.” Shein took advantage of the former loophole, the de minimis rule, which allowed smaller packages worth under $800 to skip duties. Trump’s proposed policy towards China will close this loophole with a 30% duty of around 25% on fast fashion items by June 1. For example, the once $14 pair of jeans may cost up to $18.
Even wholesale American retailers like Target and Walmart have felt the effects of losing volumes of Chinese-produced goods. “Everyday essentials are no longer affordable, and budget fashion is being tested,” reports Retail analyst Simeon Siegel. American consumers, not corporations, are estimated to bear 92% of the new tariff costs. Consumers will likely feel a pinch when going to the checkout, even from brands like Target that have previously offered affordable options.
For the consumer, price hikes affect everyday essentials like toiletries and groceries. Consumers will likely reconsider their purchases or look for alternatives if they are on a budget. Instead of shopping at Target, they may delay consumption, hoping prices will eventually drop.
Ultimately, consumers determine whether these high prices are tolerable. This ties back to the fact that American consumers bear the bulk of the tariff costs because they are the ones who pay for the increased prices. The more essential the product, the more likely consumers will swallow the higher price.
Luxury Goods
European brands with high price margins, like Dior and Gucci, often produce materials and packaging in China to cut costs. Chinese-manufactured zippers and textiles are more expensive to import, with hardware manufacturers facing an additional $150-300 in tariffs. While brands may absorb some costs, customers will still feel the price rise. Therefore, the designer purse you see on Market Street may have cost more than usual due to these increased tariffs on Chinese-made components.
Potential Effects and Returns
While the Trump administration claims these tariffs are meant to “bring jobs home,” the reality is much more complex and globalised.
In 2018, the U.S. imposed a 25% tariff hike on Chinese steel and aluminium, and according to the Peterson Institute for International Economics, while steel jobs were created, American manufacturers who used steel suffered worse. In the automotive and construction industries that rely on steel, the higher material costs reduce profitability and competitiveness, leading to job losses and slower growth in those sectors. Even though steel workers may have seen job creation, these gains were offset by losses in other parts of the economy.
China mitigated the risks of tariffs by diversifying its trade relationships. Since 2018, China has pivoted to new trade partners through regional trade agreements and intensified its economic ties with the European Union and ASEAN countries which softens the impact of U.S. dependence.
Today’s situation is different because the global supply chains have become even more interconnected. Unlike in 2018, when China faced more limited alternatives, today, China’s extensive partnerships and global manufacturing give it more resilience against U.S. trade policies.
Tariffs can disrupt the global flow of goods and have unintended consequences, which makes them a more complicated policy tool than they initially seem.
Impact on St Andrews Students
These tariffs could add unexpected costs for St Andrews students, whether preparing for summer plans or budgeting daily expenses. While Trump’s administration plans to reshape the global trade landscape, we must understand how these policies affect consumers’ day-to-day lives. Whether or not these tariffs transform into full effect, their potential impact is already shaping the future of our economy.