ARI SHAPIRO, HOST:
Imported steel and aluminum just got a whole lot more expensive. President Trump's 50% tariffs on the metals kicked in today, doubling what they were just yesterday. Trump told steelworkers last week his goal is to secure the steel industry in the United States.
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PRESIDENT DONALD TRUMP: With the help of patriots like you, we're going to produce our own metal, unleash our own energy, secure our own future, build our country, control our destiny. And we are once again going to put Pennsylvania steel into the backbone of America like never before.
SHAPIRO: So what do these higher taxes on metal mean for consumers? Martha Gimbel at Yale's budget lab has been running the numbers. She previously worked for the Biden administration. Welcome back to ALL THINGS CONSIDERED.
MARTHA GIMBEL: Thank you so much for having me.
SHAPIRO: Let's talk about one of the biggest purchases people make - cars. How will doubling tariffs on imported steel and aluminum affect car buyers?
GIMBEL: Yeah, so we're now expecting car prices to go up by about 13% in the short run.
SHAPIRO: Wow.
GIMBEL: Yeah, it's going to be a pretty big hit for people, and cars are already an incredibly expensive purchase. So 13% - that's real money.
SHAPIRO: Does it matter if we're talking about domestic or imported cars?
GIMBEL: So we're expecting domestic producers to raise their prices, and that's for a couple of reasons. One is, they are takers of steel, right? Like, they need that for making their cars. The other thing is that when you see domestic producers competing with foreign producers who have to raise their prices because of tariffs, as a domestic producer, why would you not raise your prices in response as well? And so you're going to see some price matching from domestic producers in response to the new environment.
SHAPIRO: What about car parts? Are those prices also going up?
GIMBEL: They're also going up about the same amount. So there's really - even if you're saying, OK, well, I'm just going to take my old car, keep it on the road for a while, do some repairs, those repairs are also going to cost you more.
SHAPIRO: There's a lot of metal on store shelves, whether it's soft drinks, tomato sauce, soup, canned goods. How are the higher metal tariffs likely to affect prices on groceries?
GIMBEL: So it's hard to say overall 'cause you need to know, you know, exactly how much steel is exactly in your can of soup. But overall, we're expecting to see prices for metals going up by about 33%, which, again, is a very high increase.
SHAPIRO: Yeah, and I'm thinking, store shelves are made of metal. And so is the price of stuff you buy in the store going to go up because the price of the things that make up the store infrastructure has gone up?
GIMBEL: Oh, I hadn't even been thinking about that, but I think it really speaks to the way tariffs just sneak into parts of our lives that we aren't even thinking about. You know, who amongst us is thinking about the cost of store shelves? All of a sudden, it becomes relevant.
SHAPIRO: While we're on the topic of higher prices, the discount retailer Dollar General announced this week that their sales are up compared to the same period last year, and they're forecasting better sales for the rest of the year than previously. What do you make of that news?
GIMBEL: Yeah, it's never a good sign when places like Dollar General are doing really, really well, except, of course, for the people who are involved with Dollar General. It seems like what is happening is that consumers are shifting to or starting to shift to lower-priced goods because of the price pressures that they're feeling. So that's good news for Dollar General but not necessarily good news for the overall economy.
SHAPIRO: To expand beyond the metal tariffs. If these numbers remain in place - and of course, there is no guarantee that they will - how will that affect the average household budget in America, according to your calculations?
GIMBEL: Yeah, so we're expecting to see increased costs of about $2,500 per household. You know, that obviously is a really substantial cost increase for people to be facing. It's even higher for those - as a percentage of income - for people at the bottom of the income distribution. That's because they tend to spend more on goods, and it just makes it harder for them to absorb these price increases.
SHAPIRO: Does that assume that the cost of the tariffs will all be passed along to the consumer, or could it be that some of these retailers absorb the costs themselves?
GIMBEL: You know, there's a lot of discussion about whether or not people are going to absorb the costs themselves. Historically, that has not happened. And so you can look at the first set of Trump tariffs and how much that has been passed on to consumers. And you'll see economists arguing, you know, was it 97% passed on? Was it 99% passed on? Was it 100% passed on? That's a fun debate for us to have, but for the American consumer, it basically means the same thing. They are going to be paying these tariffs.
SHAPIRO: Martha Gimbel is the executive director of The Budget Lab at Yale. Thank you.
GIMBEL: Thank you for having me. Transcript provided by NPR, Copyright NPR.
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