Tariff revenues are rising. When will consumers and companies feel the impact?

The current tariff environment presents a complex investment landscape where substantial tariff revenue collection has not yet translated into broad consumer price impacts. Investors face a critical timing question: when will these trade policies materially affect consumer behavior and/or corporate margins?

Understanding this lag effect may influence portfolio positioning decisions considering the potential economic challenges and the need to identify which sectors and companies will be most vulnerable to tariff pass-through effects.

Today’s tariff landscape and revenue reality

As of June 30, 2025, the U.S. has 10% tariffs on most imports from all countries, 50% tariffs on steel and aluminum imports, and then elevated tariffs on China equal to an effective rate of about 30%.¹ Year to date through late June, the revenue associated with these tariffs has already totaled $96.5 billion, more than double the tariff revenue collected during the same period in 2024.

Exhibit 1: Tariff collections catapulted higher in the spring

January 2024 to June 26, 2025. Source: Bloomberg

So the tariff revenues are here, but where are the price increases? May’s consumer price index (CPI) data showed just a 2.4% year-over-year increase, seeming to indicate there hasn’t been a pass-through of the tariffs.

While that largely still appears to be the case, there are pockets of evidence that tariffs have begun to create upward price pressures, namely on the costs of durable home goods like major appliances and furniture.

Exhibit 2: Bigger-ticket home goods are beginning to bite consumers

June 2022 to May 2025. Source: Bloomberg

But where is the broader economic impact of the tariffs? Why have we not seen a meaningful price shock at the store?

The lag effect: Why impacts are delayed

Our response: Wait for it.

We believe the front-loading of imports and purchases prior to the tariffs at the start of the year likely allowed some price stability through May. There was also a negotiating period on the reciprocal tariffs, which is now set to end at the beginning of August except for those countries that are “negotiating in good faith” and for whom the reciprocal tariffs may continue to be delayed.

A complex sorting process

If and when tariffs are imposed or increased, there is subtle sorting to be done between suppliers, retailers, and consumers on who will bear the cost of the tariffs. How the tariff cost will be shared will come down to who in the chain from production to consumption is most beholden, in need, or has no alternative.

If consumers import the majority of a particular product or don’t have ready substitutes, then odds are they will bear the brunt of tariff costs. But we must recognize that producers and retailers also have avenues other than price to manage the increase in input costs—such as through reduced hiring, outright workforce reductions, or shifting production location.

Tariffs don’t just impact the consumer. Businesses may also be impacted by rising input prices in business-to-business transactions. According to a Federal Reserve study, the impact on imports in these types of transactions could be higher because the markups on the products tend to be smaller and there is a greater percentage of imported goods used.²

Understanding the lag effect and the varying impacts at each stage of the supply chain may influence portfolio positioning decisions considering the potential economic challenges and the need to identify which sectors and companies will be most vulnerable to tariff pass-through effects.

Everything comes out in the wash

But how long can this sorting take? If we look back to the first Trump administration, the tariffs imposed on imported washing machines took about five months to take hold after their announcement. After those five months, it was found that the price increases to the consumer were at least one-to-one tied to the tariff rate.³

Notably, despite the tariffs only applying to washing machines, we also saw increased prices for clothes dryers given their complementary nature. There also wasn’t any apparent price distinction between made in the USA and imported washing machines as domestic producers took the opportunity to raise prices.

Timeline and implications

Putting this all together, when might we see the effects of the tariffs? Relative to the fanfare, media coverage, and immediacy of the April 2 reciprocal tariff announcements, the actual flow through of the tariffs to prices may take time and depend on the trade negotiations between now and the beginning of August, and then the ensuing parsing of the cost of those tariffs between producers, retailers, and consumers. If the tariff on imported washing machines is any guide, we could start seeing changes to prices toward year end.

As to the implications, these are less clear, especially since we don’t yet know the level of tariffs and on what goods they’ll ultimately be applied. Based on prior experience, consumers and businesses could potentially take the brunt of the increase, particularly where we don’t have ready substitutes or where we have insufficient domestic production.

With a U.S. economy driven by the consumer, a slowdown in consumption due to tariffs would negatively impact GDP growth. Business profit margins may compress as they face a consumer that’s less willing to pay elevated prices. Businesses may also reduce staffing in response to the reduced demand and to help maintain margins.

While revenues from tariffs are up year over year, we believe the tariff story is just beginning to unfold in ways that may meaningfully impact both consumer behavior and corporate profitability in the months ahead.

 

 

 

1. State of U.S. Tariffs: June 17, 2025 | The Budget Lab at Yale
2. The Effects of Tariffs on Inflation and Production Costs | Federal Reserve Bank of San Francisco
3.The Production Relocation and Price Effects of U.S. Trade Policy: The Case of Washing Machines