When consumers can expect inflation, price hikes to hit

Consumers and businesses should expect inflation to be resurgent and prices across many goods and services to rise, but if companies start citing President Trump’s new tariffs in price hikes today, they’re taking advantage of the situation. That’s based on the way customs enforcement works and how long it takes for products from overseas to move through the global supply chain.

There was some belief that when Trump’s tariffs went into effect at midnight the price impacts would be immediate, and some have already started to talk that way.

“Businesses are starting to raise prices in anticipation of how to weather this storm, which means costs are going up for families,” said Senator Elizabeth Warren (D-Mass.) on CNBC on Wednesday morning.

But an updated guidance on the China tariffs released by U.S. Customs on Tuesday included an “on the water clause” which states that cargo coming into the ports today or in the coming weeks will not be subject to the tariffs.

“BE COOL! Everything is going to work out well,” Trump wrote on Truth Social three minutes after markets opened on Wednesday. “THIS IS A GREAT TIME TO BUY!!!”

To be sure, the hit to both businesses and consumers is on the way, as billions of dollars per day of imports are tariffed, with more than half from China at the 104% rate.

Major corporations are preparing both investors and consumers for eventual cost and price impacts. Delta Air Lines CEO Ed Bastian called Trump’s tariffs “the wrong approach,” and pulled its first quarter forecast on Wednesday. Walmart CEO Doug McMillon pulled operating income guidance citing uncertainty about the potential impact of sweeping tariffs on its business, and said the company wants to maintain flexibility if it needs to absorb more cost to avoid raising prices.

A recent CNBC survey of the CNBC CEO Council found most CEOs saying prices will rise anywhere from 5% to 20%. Though there are dueling forces at work: an era in which consumers have become more accustomed to inflation, but a time when companies are more cautious about sending more price hikes through to already stretched consumers.

Another factor that will influence pricing is sharp changes in supply and demand. As companies begin to pull back on orders, which is happening already amid the uncertainty related to overseas manufacturing costs and domestic consumer demand, lower supply will potentially serve as a force sending prices higher. Amazon has reportedly already cancelled Chinese orders, according to a Bloomberg report.

Federal Reserve Chair Jerome Powell recently said that the announced tariffs were “significantly larger than expected.”

“The same is likely to be true of the economic effects, which will include higher inflation and slower growth,” he said.

Products are already subject to the tariffs Trump levied broadly on imports starting last Saturday, but not country-specific trade levies.

Any cargo “loaded onto a vessel at the port of loading and in transit on the final mode of transport on or after 12:01 a.m. EDT April 5, 2025, and before 12:01 a.m. EDT April 9, 2025, and (2) are entered for consumption, or withdrawn from warehouse for consumption, before 12:01 a.m. EDT on May 27, 2025, are subject to the 10% additional rate in lieu of the country-specific rate of duty.”

May 27 is an important date because it covers the travel time it takes for ocean freight to move to North America once on the water. That means if consumers see eye-popping prices anytime soon it means retailers are taking advantage of the tariff situation.

This on-the-water clause gives countries time to negotiate with Trump, and the president has said many countries have reached out to make a deal. But there are no guarantees that deals will be struck by the time shipments arrive at U.S. ports. For one, there are, according to the White House, 70 countries that have reached out at the same time, stretching the administration trade team’s ability to make deals with all. And there is reason to believe it will be a difficult deadline to meet.

“Countries can start negotiations, but those will take quite a bit of time,” said Josh Teitelbaum, senior counsel of Akin. “For example, at least 20% of clothes bought in the last year came from China, another 19% from Vietnam. The U.S. Trade Representative has serious issues with both countries and the White House has made clear that zero-for-zero tariffs is not a deal they want to strike. Once you start negotiating non tariff barriers it’s a lot more complicated.”

According to an analysis by ImportGenius on the daily dollar average of U.S. imports, once the tariff is collected, an estimated $1.247 billion will be collected daily on a national basis from the China tariffs, and $331 million will be collected daily nationally on EU tariffs. A total of $172 million in tariffs will be collected daily from the 46% Vietnam tariffs.

“Our figures corroborate the White House’s numbers, and show that over half of the expected $2 billion in daily tariffs will come from duties levied on Chinese imports, a tax U.S. importers will be responsible for paying immediately,” said William George, director of research for ImportGenius. “The $2 billion figure is based on recent import volumes, and is likely to plummet along with import volumes while the tariffs remain in effect.”