US President Donald Trump’s imposition of steep tariffs has sent shockwaves through global markets, causing the US dollar to plummet by 2% on “Liberation Day.” This move defies market expectations for a stronger greenback and adds to the costs faced by American consumers due to import taxes.
Trump’s aggressive trade policies have already led to a widening array of duties on China, Canada, Mexico, steel, aluminum, and autos. The latest tariffs, which were much steeper than anticipated, have increased the effective tariff rate to around 25%, the highest since 1909. This has raised recession odds to 60% from 40%, according to Fitch Ratings.
The weaker US dollar makes imports more expensive, resulting in price increases for Americans. Companies are expected to absorb some costs and pass them on to consumers, with estimates suggesting a $5,000-$10,000 increase per vehicle due to auto tariffs. Former Treasury Secretary Larry Summers estimated the overall net impact of tariffs will cost a family of four around $300,000.
A weaker dollar also leads to higher prices for imports from certain countries, such as Germany. A car priced at 50,000 euros would translate to about $55,000 at Friday’s exchange rate, with a premium of $4,000 more than in early January.
Trump has downplayed concerns that auto tariffs will cause price hikes, saying consumers will buy American-made cars if prices go up. However, economists warn that the actual impact of tariffs on the economy and financial markets will be severe.
Source: https://fortune.com/2025/04/05/trump-tariffs-us-dollar-import-prices-exchange-rates-economy-recession