In a historic move that could reshape international trade, the United States signed an executive order on July 31, 2025, introducing sweeping new tariffs on imported goods. The measure, which will go into effect at midnight on August 7, has sparked concern across the global economic community and could trigger far-reaching consequences for supply chains, consumer prices, and inflation.

Under the order, most countries will face a standard 15% tariff on exports to the U.S., a dramatic increase from previous rates. Meanwhile, allies such as the United Kingdom, European Union, Japan, and South Korea will benefit from a slightly reduced rate of 10–20%, reflecting recent cooperative trade commitments and investments in the U.S. market. Mexico has been granted a 90-day grace period before the new tariffs are applied.

U.S. Tariffs Reach Highest Level in Nearly a Century

According to data from Fitch Ratings and Yale University, the new tariff regime will push the average U.S. tariff rate to approximately 17%, the highest since the Smoot–Hawley Tariff Act of 1930. This significant policy reversal marks a break from decades of global trade liberalization and threatens to undermine the foundations of the rules-based international trading system.

Corporate Costs Rise Sharply

The economic impact of the tariff hikes is already being felt by U.S. manufacturers and retailers. In June 2025, the U.S. government collected $27 billion in tariffs, a fourfold increase compared to the same month last year—costs that are largely absorbed by American importers.

Several major corporations are reporting increased financial strain:

• Ford Motor Company estimates an additional $800 million in expenses.
• Hasbro, the toy manufacturer, expects to incur around $60 million in added costs.
• Procter & Gamble has announced plans to raise prices on 25% of its products starting in August.

These figures underscore a growing concern: the burden of higher tariffs is shifting quickly from corporations to consumers.

Consumers Likely to Face Higher Prices

Although major retailers like Walmart and Target are attempting to cushion the blow through strategic inventory management, their efforts are only temporary. Surveys suggest that:

• 70% of manufacturing companies and
• Nearly 50% of service firms have already begun passing tariff-related costs on to consumers.

However, experts warn that only a portion of the true price impact has been realized so far. Once existing inventories run out in late 2025, a wave of price increases is expected to sweep across the retail sector, particularly in electronics, clothing, furniture, and household goods. Analysts predict this could trigger a fresh round of inflation by the fourth quarter of 2025 or early 2026.

Expert View: “A Dark Day for Global Trade”

Commenting on the developments, Eswar Prasad, an economist at Cornell University, described the policy shift as a “dark day for global trade.” He emphasized that the move undermines decades of efforts to build an open, predictable, and rules-based global trading framework.

“This is not just an economic move—it’s a political signal. It shows a clear retreat from global cooperation,” said Prasad.

Broader Implications

The long-term consequences of these tariff hikes are still unfolding. Potential outcomes include:

• Strained relations with trade partners.
• Increased volatility in global supply chains.
• Higher costs for American businesses and families.
• Disruptions to global inflation forecasts.

Analysts also warn that retaliatory tariffs or shifts in global sourcing strategies could follow, deepening trade fragmentation and weakening multilateral institutions such as the World Trade Organization (WTO).

Conclusion

The United States’ decision to enact the most significant tariff increase in modern history marks a pivotal moment for global commerce. While the policy aims to boost domestic production and protect key industries, it risks sparking inflationary pressures at home and reigniting trade tensions abroad. As businesses and governments brace for the fallout, one thing is clear: the global trade map is being redrawn—and the next chapter remains uncertain.