Why "TACO" Is Fiction
When the internet trended TACO – Trump always chickening out – this abbreviation is fiction. It characterized Trump tariffs as falling or declining. However, they are still at least in the double-digit percentage and could rise.
Effective tariff rates receded on China after the truce negotiated in Geneva. However, the current effective rate is 17.8%. These are levels not seen since before 1950. American consumers will end up paying more for imports.
A court recently ruled that Trump's tariffs are illegal and overstepped his power on the claim of national emergency. After the White House appeals the decision, watch out for courts eventually overturning tariffs.
Price Hikes
American firms raised prices to cover tariff costs. In May, Subaru increased prices by up to $2,055 on several of its models. Similarly, Ford Motor (F) increased prices by $600 to $2,000 for various models. In the retail sector, Walmart (WMT) CEO Doug McMillon warned about higher prices in May. This month, prices will go up by more.
Nike (NKE) increased prices for its apparel and equipment.
Chinese firms Shein and PDD’s (PDD) Temu increased prices by up to 377% and a double-digit percentage, respectively. Americans will likely cut their spending on those sites. The U.S. changed the de minimis tax exemption. As a result, consumers are better off buying goods from non-Chinese firms. They may increase their spending on small businesses. That would help the small-cap ETF, the iShares Russell 2000 (IWM).
