As Donald Trump assumed the presidency, a significant shift in U.S. trade policy loomed, with consumers bracing for potential tariffs that could reach 50% on trade partners. According to a survey by Olivier Coibion of the University of Texas, Yuriy Gorodnichenko of the University of California at Berkeley, and Michael Weber from Chicago Booth, many consumers anticipated these changes. Conducted through NielsenIQ, the survey gathered approximately 13,500 responses.
The researchers noted a partisan divide in expectations regarding who would bear the brunt of higher costs: domestic consumers or foreign producers. "Ever since World War II, the key development in trade policy has been the very gradual but persistent reduction in trade barriers," they wrote. However, Trump's inauguration marked a potential reversal as "the largest economy in the world is slated to start imposing large tariffs on its most important trading partners."
Survey participants expected Trump to follow through on his tariff promises. They predicted tariffs averaging 35% on Canada and European countries and 42% on Mexico. The highest anticipated tariff was for China at 50%. Democratic respondents believed U.S. consumers would bear two-thirds of a hypothetical 20% tariff's cost, while Republicans estimated consumer costs at about 40%, with foreign producers covering much of the remainder.
Economists generally agree that tariffs increase prices for both imports and domestically produced goods. Respondents concurred, forecasting a 10% rise in import prices and a 14% increase for domestic goods within a year. Both Democrats and Republicans expected tariffs to boost U.S. production slightly more according to Democrats' predictions.
The prospect of rising inflation prompted over 40% of respondents to consider stockpiling goods before tariffs took effect; this included nearly one-third of Republicans. More than one-third also planned to save money due to price uncertainty.
The survey also provided insights into business behavior through responses from over 2,500 managers. Only 17% indicated their companies would stockpile imports due to tariffs; instead, many planned to raise prices or seek alternative suppliers.
Managers displayed less partisanship compared to consumers: "It appears that the need to maximize profits may dampen some ideological impetus," noted the researchers.
Coibion, Gorodnichenko, and Weber highlighted that consumer actions such as stockpiling might already be underway ahead of any formal tariff implementation: "This suggests that inflationary consequences will manifest even before tariffs are put in place."
Citation: Olivier Coibion, Yuriy Gorodnichenko and Michael Weber, “The Upcoming Trump Tariffs: What Americans Expect and How They Are Responding,” Working paper, January 2025.