Opinion: How tariffs will shape America this summer

With tariff news starting to stabilize in terms of the implementation of new tariff rates, we could make a much better analysis as to how these current rates will shape the American economy this summer: the first season to have a full experience with "Liberation Day 2.0."

An American cargo vessel.

With these current rates, we are expecting at minimum a flat 10% tariff on all imported goods with some minor exceptions like foreign oil which the incumbent administration deems too important to remove free importation of. This includes a wide range of products both produced at home and not, from semiconductors to bananas.

While the impact of these tariffs has yet to be known officially, some warning signs have appeared to have demonstrated their early stages. May's CPI report showed increasing inflation despite high rates, which although was an overperformance compared to expectations, is an inflation increase, nevertheless. When you factor in massive drops in the price of oil (excluding its short-term spike in June due to Israel-Iran), the real inflation of everyday goods could be much higher.

May CPI, U.S. Department of Labor Statistics.

In addition, some companies have already made price adjustments and hiring freezes. Walmart, for instance, rose their price of bananas by 8%, reflecting its 10% respective tariff rate (statistic taken from Congresswoman Madeleine Dean in testimony against Secretary of Commerce Howard Lutnick). Key electronics distributor Best Buy has also made promises to increase the prices of its goods to maintain margin.

U.S. Congresswoman Madeleine Dean.

If these trends continue, we could see massive inflation increases as companies begin to face external pressure from importing raw materials to manufacture or plain simply manufactured products. First hit could be food industries whose lifeline is external produce, such as avocados, cocoa, and the previously mentioned bananas, which could not be produced in the largely deciduous United States. Worse, food prices tend to affect consumers the most as they then impact grocery expenses. And, with many Americans experiencing an affordability crisis right now, even a small rise in food prices could be the tipping point between being able to pay rent and facing eviction.

In regard to the Fed's pursuit of rate cuts, higher inflation would pretty much warrant keeping rates high or even increasing rates. But, as the incumbent Trump administration loudly demonstrates, demanding a 1% rate cut, rate hikes are by no means a possibility. We may still see rate cuts then, but these cuts will result in inflation trickling higher, starting an unescapable cycle unless tariffs were to be reduced. Middle Eastern tensions could put the cherry on top for this with higher oil prices, as OPEC countries will largely side with Iran and put into place more restrictions on the United States as a key oil buyer.

But, on the other hand, if trade negotiations do continue, we could see tariffs fall, meaning that the risk of inflation would reduce. In addition, the passage of the "BBB" could counter inflation if massive spending cuts were to be made in a revised piece of legislation, and tax cuts would put more emphasis on using capital for investment and furthering production methods domestically. We could then see low-tax areas like the South and Southwest grow in available job opportunities as companies pour in from abroad.

The best circumstance right now for the economy would be a balance between tariffs and tax cuts.