Trump’s Tariffs Could Raise Factory Costs by Up to 4.5%, New Study Warns

A new economic analysis reveals that Trump tariffs on factory imports could raise costs for U.S. manufacturers by 2% to 4.5%, potentially leading to layoffs, wage stagnation, and price hikes across the economy.

Economic Pressure Builds on U.S. Factories

The study by the Washington Center for Equitable Growth, published Tuesday, outlines the financial strain that Trump’s proposed tariffs could place on American factories. Researcher Chris Bangert-Drowns warned that even small cost increases could jeopardize plants with slim margins.

“There’s going to be a cash squeeze for a lot of these firms,” Bangert-Drowns said.

New Tariffs Target Global Supply Chains

Trump’s new tariff frameworks affect the European Union, Japan, the Philippines, Indonesia, and the UK, with rates ranging from 15% to 50% starting this Friday. Despite Trump’s claims that these measures will protect domestic jobs, analysts say the long-term economic impact may be more damaging than beneficial.

Stock markets responded cautiously, showing relief that rates weren’t higher. However, concerns remain that tariffs will ripple through the global economy, increasing prices and slowing growth.

Study Highlights Risks for Manufacturing Hubs

In key swing states like Michigan and Wisconsin, more than 20% of jobs are in sectors vulnerable to tariffs. The study warns that Trump tariffs on factory goods could undermine these local economies rather than revive them.

The artificial intelligence sector, which Trump hailed as the future of U.S. industry, also depends heavily on imported components. In fact, over 20% of inputs in computer and electronics manufacturing come from overseas.

Small Manufacturers Feel the Squeeze

Many factory owners are already bracing for the impact. In Michigan, Justin Johnson of Jordan Manufacturing said the price of steel coils rose 5% to 10% this year. Even though his company doesn’t import steel, domestic prices are spiking because tariffs have removed foreign competition.

“There’s no red-blooded capitalist who isn’t going to raise his prices,” Johnson said.

Knife Company Faces $77K Tariff on German Machinery

Montana Knife Co. founder Josh Smith supports Trump but worries the tariffs will stall his business growth. A 10% tariff on a $515,000 German-made grinder cost him $51,500—and that rate is set to rise to 15%, adding another $25,750 in tax.

“That’s a full salary,” Smith said. “It’s money I could use to hire new workers.”

The company also relies on specialty steel, which was previously sourced domestically. After the U.S. supplier went bankrupt, production moved to Sweden. The new 50% steel tariff could force Smith to scale back hiring and expansion in 2026.

White House Claims Contradicted by Data

The Trump administration insists that tariffs are not contributing to inflation. A report from the Council of Economic Advisers claimed import prices fell between December 2024 and May 2025.

However, Yale economist Ernie Tedeschi argues the opposite:

“Import prices have accelerated in recent months. That’s the real trend.”

According to Yale’s Budget Lab, the average U.S. household could lose $2,400 in purchasing power due to the tariffs.

What Comes Next?

Although the White House says new trade deals will open markets, the Trump tariffs on factory costs are causing short-term pain for many American manufacturers. Treasury Secretary Scott Bessent acknowledged that companies around the world are willing to “pay a toll” to maintain access to the U.S. market.

But for U.S. factory owners, that toll is becoming harder to absorb.

Source: AP News