Trump’s tariffs left the U.S. economy with higher prices and weaker growth, an economist says

Tariffs raised prices

Trump’s tariffs left the U.S. economy with higher prices and weaker growth, economist Mark Zandi said on May 6, 2026. Zandi is chief economist at Moody’s Analytics. Federal Reserve researchers estimated that 2025 tariff changes raised core goods prices, while the CBO said tariff increases would reduce real output.

Tariffs are taxes on goods crossing borders, and importers pay them before products reach stores or factories. Businesses may absorb some costs, but Federal Reserve contacts reported passing tariff costs to customers. That path explains how state economies felt higher prices through ports, retailers, suppliers, and households in U.S. communities nationwide later.

The policy widened

President Donald Trump announced broad reciprocal tariffs on April 2, 2025, through an executive order aimed at large U.S. trade deficits. The White House said a 10% tariff on all countries would take effect on April 5, with higher country rates beginning on April 9.

The policy mattered for port states because duties are assessed when imports enter the country. California, Texas, and New Jersey handle major flows of goods before products move by truck, rail, or warehouse. Importers, retailers, and manufacturers then had to decide whether to raise prices, cut orders, or accept lower margins in their own markets after rollout.

Goods inflation increased

Federal Reserve economists studied tariff effects as price data arrived. In an analysis released April 8, 2026, they estimated that tariff changes through November 2025 raised core goods PCE prices by 3.1% through February 2026.

Core goods exclude food and energy and include many items families buy, such as clothing, appliances, furniture, and vehicles. The finding explained why tariff costs were passed on to buyers far from ports.

A couch bought in Colorado or a coat bought in Maine could reflect import costs paid earlier by wholesalers, retailers, or manufacturers, before the final price appeared on store shelves nationwide today.

Deficits fell, output weakened

The Congressional Budget Office examined tariff increases ordered from Jan. 6 through May 13, 2025. In a report released June 4, 2025, CBO estimated the policies would reduce federal deficits by $2.8 trillion over the 2025 to 2035 period, including economic feedback.

The same analysis said the tariffs would raise prices for consumers and capital goods, reduce purchasing power, and lower real output.

For states, that meant a company buying imported machinery could delay expansion when equipment costs rose. At the same time, families had less money left for other purchases in many local economies after the rollout across many states.

Fun fact: The word tariff sounds like a government rule, but at checkout, it can act like a hidden price increase because import costs may be passed along to consumers.

First quarter GDP fell

The economy contracted after companies moved goods quickly ahead of higher duties. The Bureau of Economic Analysis initially reported on June 26, 2025, that real gross domestic product fell at a 0.5% annual rate in the first quarter. After later revisions, BEA data showed real GDP fell at a 0.6% annual rate in that quarter.

Earlier reporting and BEA data showed imports surged as firms front-loaded products before tariffs took effect. Imports are subtracted from GDP calculations, so the rush weakened the measured output.

States with distribution centers, including Illinois and Georgia, could see warehouse activity rise even as national growth numbers across key logistics areas and freight corridors fell that quarter.

Fun fact: GDP is like an economy’s scoreboard. The U.S. GDP number is watched globally because it acts as a major economic barometer.

Trade goals stayed difficult

Tariffs were meant partly to narrow trade gaps, but later data showed the deficit remained. The Census Bureau and Bureau of Economic Analysis said on May 5, 2026, that the goods and services deficit was $60.3 billion in March.

March exports were $320.9 billion, while imports were $381.2 billion. Tax Foundation analysts also said the tariffs had not meaningfully changed the trade balance.

Trade gaps reflect consumer demand, energy prices, exchange rates, and supply chains. A tariff can reduce some imports, but it does not automatically increase factory output or exports in state economies after the policy takes effect nationally.

Import exposure varied

Pew reported on Oct. 8, 2025, that U.S. goods imports totaled $3.3 trillion in 2024, accounting for 11.2% of national gross domestic product. Exposure was uneven across states. Imports exceeded 20% of state output in Indiana, Kentucky, Michigan, and Tennessee, where factories rely on parts and materials from abroad.

Pew said imports accounted for less than 3% of output in Hawaii, South Dakota, Wyoming, and the District of Columbia. This pattern shows why tariff costs were likely stronger in manufacturing states tied to autos, metals, appliances, and machinery than in less import-dependent economies nationwide during this trade period.

Texas had high exposure

Texas was central to the tariff story because it ranked No. 1 among U.S. states in trade in 2024. The Hunt Institute reported that Texas had $852.2 billion in total trade that year. The Texas Comptroller described the state as a central part of the U.S. trade system, with official ports of entry and major logistics facilities moving goods across borders and through domestic supply chains.

Goods move through Gulf Coast ports, border crossings, airports, railways, and highways. Tariffs can raise costs before products reach a Dallas store, a Houston supplier, or a Laredo warehouse, affecting companies, consumers, supply chains, and communities across Texas during this trade period.

California went to court

California challenged the tariff policy in federal court, arguing that it harmed businesses and residents. On April 16, 2025, Gov. Gavin Newsom and Attorney General Rob Bonta filed the lawsuit in San Francisco.

Reuters reported that the case argued that the International Emergency Economic Powers Act did not authorize such broad tariffs without Congressional Authorization. Reuters also reported that California ports handle about 40% of U.S. imports.

That exposure made the state vulnerable to higher import costs, shipping changes, and possible pressure on tax revenue from weaker business activity in the following fiscal year across state-wide public services.

Michigan faced auto costs

Michigan showed how tariffs can affect a state through one large industry. Axios reported on Feb. 24, 2026, that Michigan companies paid about $3.8 billion in tariffs under the International Emergency Economic Powers Act from February through December 2025.

The same report said Michigan ranked fifth nationally for imports, with $167 billion last year, much of it tied to autos. Vehicle production uses parts, electronics, steel, and aluminum that may cross borders before assembly.

Higher input costs can affect suppliers, plants, dealers, repair shops, and families buying vehicles across Michigan and nearby markets during the statewide tariff period today.

Retail prices changed

Federal Reserve reports showed how firms responded after tariffs raised costs. In the Boston Fed district report released Sept. 3, 2025, a clothing retailer said it marked up prices by 10% to 15% on about half of its items because of tariffs.

The same report said other retailers raised prices only slightly, and one home furnishings seller said manufacturers absorbed more tariff costs than expected.

A January 2026 Fed summary later said contacts across districts were passing on costs as inventories ran down. Store-level effects, therefore, varied by business and region across many U.S. markets during this period.

Farm states faced retaliation

Tariffs also mattered for farm and export states because trading partners can answer with duties on U.S. products. The Center for American Progress said on April 17, 2025, that retaliatory tariffs from China, Canada, and the European Union were likely to hurt critical export industries in every state.

The report said Texas, California, New York, Illinois, Indiana, Louisiana, and Michigan each sold more than $30 billion a year to those markets.

Export risk can affect farmers, factories, grain elevators, truckers, banks, and small towns that depend on foreign buyers across state economies during this trade period. which is why Trump’s illegal tariffs could end up bloating U.S. debt by $1.7 trillion matters beyond Washington.

Courts added uncertainty

Court rulings added uncertainty after many importers had paid duties. Reuters reported on April 21, 2026, that a tariff refund system went live as thousands of companies filed claims, with Customs and Border Protection aiming to return up to $166 billion to importers under a court order.

Reuters reported that more than 330,000 importers had paid the tariffs at issue on 53 million shipments. Axios reported that the administration moved quickly to create the refund process, while President Donald Trump publicly discouraged companies from seeking refunds.

On May 5, 2026, Tax Foundation analysts reported that the remaining tariff mix would result in an average tax increase of $700 per U.S. household in 2026, affecting budgets across many states during the tariff period.

That added pressure helps explain why the Fed cuts rates amid warnings about household financial pressure for families already dealing with higher costs.

This slideshow was made with AI assistance and human editing.

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