Trump’s trade battles raise consumer costs, market fears

“This is something you would expect only in a banana republic,” former U.S. Treasury Secretary Janet Yellen said.

“August 1 will go down in history as the day the U.S. Treasury market died. If we cannot trust the data, what can we trust?” British economic commentator Bill Blain said.

Their remarks came after U.S. President Donald Trump abruptly dismissed the head of the Bureau of Labor Statistics at the Department of Labor on Aug. 1, claiming that employment data had been manipulated. The Labor Department had revised its May and June nonfarm payroll growth figures down by 258,000 from previous reports, fueling market jitters. The unprecedented firing of the nation’s top statistics official underscores Trump’s anxiety as he faces mounting domestic and international backlash over his high-tariff policy.

Trump’s firing offensive has now extended to the private sector. On Aug. 12, he targeted Goldman Sachs CEO David Solomon on Truth Social, saying, “David should either hire a new economist or focus on his DJ hobby and stay out of running a major financial institution.” Earlier, Goldman Sachs had issued a report warning that if high tariffs persisted, U.S. consumers would shoulder 67 percent of the tariff burden. The economist who authored the report appeared on television after Trump’s pressure campaign, reiterating that “tariffs will start hitting American consumers’ wallets” and that the original projection remained valid.

So far, U.S. consumer prices have remained more stable than expected. Last month, the Consumer Price Index rose 2.7 percent from a year earlier, below the 2.8 percent forecast. However, the Producer Price Index, which influences consumer prices over time, climbed 3.3 percent in July year-over-year, well above the 2.5 percent estimate. Analysts increasingly believe that as companies’ tariff costs mount, they will inevitably pass them on to consumers. The Washington Post reported that major retailers such as Costco and Target are preparing to raise prices as inventories secured earlier this year run out. Toy prices, which depend heavily on Chinese imports, were already 3.2 percent higher in April through June than a year earlier.

Above all, Trump’s unpredictable economic policies are amplifying the uncertainty most feared by markets. Some analysts say his actions, including imposing a 15 percent export tax on Nvidia and AMD as a condition for export licenses to China, firing a statistics chief, and demanding the resignation of Intel’s CEO, mirror aspects of Chinese-style state capitalism.

Against this backdrop, if the tariff-driven economic shock worsens, Washington may be forced to adjust its tariff rates. The Trump administration has in the past alternated between imposing and delaying tariffs, drawing the derisive acronym “TACO,” for “Trump Always Chickens Out.” Recently, Yeo Han-koo, South Korea’s chief trade negotiator, said, “For certain items such as toys, there is concern about inflation, so the U.S. might selectively choose not to impose tariffs later.” The South Korean government should closely monitor U.S. economic trends during additional negotiations, including the $350 billion investment pledge in the U.S., and prepare for the possibility of renegotiating tariff rates or investment terms.