Trump's tariffs could squeeze US factories and boost costs by up to 4.5%, a new analysis finds

Tue, Jul 29, 2025, 6:52 AM 6 min read

WASHINGTON (AP) — As President Donald Trump prepares to announce new tariff increases, the costs of his policies are starting to come into focus for a domestic manufacturing sector that depends on global supply chains, with a new analysis suggesting factory costs could increase by roughly 2% to 4.5%.

“There’s going to be a cash squeeze for a lot of these firms,” said Chris Bangert-Drowns, the researcher at the Washington Center for Equitable Growth who conducted the analysis. Those seemingly small changes at factories with slim profit margins, Bangert-Drowns said, “could lead to stagnation of wages, if not layoffs and closures of plants" if the costs are untenable.

The analysis, released Tuesday, points to the challenges Trump might face in trying to sell his tariffs to the public as a broader political and economic win and not just as evidence his negotiating style gets other nations to back down. The success of Donald Trump's policies ultimately depends on whether everyday Americans become wealthier and factory towns experience revivals, a goal outside economists say his Republican administration is unlikely to meet with tariffs.

Trump has announced new frameworks with the European Union, Japan, the Philippines, Indonesia and Britain that would each raise the import taxes charged by the United States. He’s prepared to levy tariffs against goods from dozens of other countries starting on Friday in the stated range of 15% to 50%.

The U.S. stock market has shown relief the tariff rates aren’t as high as Trump initially threatened in April and hope for a sense of stability going forward. Trump maintains the tariff revenues will whittle down the budget deficit and help whip up domestic factory jobs, all while playing down the risks of higher prices.

“We’ve wiped out inflation," Trump said last Friday before boarding Marine One while on his way to Scotland.

But there's the possibility of backlash in the form of higher prices and slower growth once tariffs flow more fully through the world economy.

A June survey by the Atlanta Federal Reserve suggested companies would on average pass half of their tariff costs onto U.S. consumers through higher prices. Labor Department data shows America lost 14,000 manufacturing jobs after Trump rolled out his April tariffs, putting a lot of pressure as to whether a rebound starts in the June employment report coming out Friday.

With new tariffs in place, there are new costs for factories

The Washington Center for Equitable Growth analysis shows how Trump’s devotion to tariffs carries potential economic and political costs for his agenda. In the swing states of Michigan and Wisconsin, more than 1 in 5 jobs are in the critical sectors of manufacturing, construction, mining and oil drilling and maintenance that have high exposures to his import taxes.