So, everyone is asking the same thing right now. You see it on the news, you hear it at the hardware store, and you definitely feel it when you look at the price of a new truck. Are Trump tariffs working? Honestly, the answer depends entirely on who you ask and which part of the receipt you're looking at. If you’re looking for a simple "yes" or "no," you’re going to be disappointed because the 2026 economic landscape is kind of a mess of conflicting data.
The Trillion-Dollar Question
Let’s talk about the big stuff first. As of mid-January 2026, the United States has seen the average effective tariff rate climb to roughly 11.2% to 15.8%, according to recent tracking from the Tax Foundation and the Yale Budget Lab. That is the highest we’ve seen since the 1930s. Some analysts, like those at the Penn Wharton Budget Model, even pegged the rate higher depending on how you calculate the "reciprocal" duties.
Donald Trump says they’re the "greatest thing ever invented." On one hand, the government is raking in cash. We're talking about an estimated $2.2 trillion in revenue over the next decade. That’s not pocket change. But the flip side? Most economists—including those at PIIE—are watching inflation creep toward 3.5% for the first half of 2026.
It’s a weird tug-of-war.
What’s Happening at the Checkout Counter?
You’ve probably noticed that things aren’t getting cheaper. While the administration argued that foreign countries would pay these taxes, that’s not really how it works in the real world.
When a 25% tariff hits steel or a 10% blanket tax hits everything from Canada, the person importing those goods has to pay the U.S. Customs and Border Protection. They don't just eat that cost. They pass it to you. Morningstar recently reported that while businesses used up their "pre-tariff" inventory throughout 2025, those stockpiles are officially gone. Now, in early 2026, we’re seeing the "cash cost" of these tariffs finally hitting the sticker prices on shelves.
- Groceries: Ground beef is up 15.5%.
- Coffee: Prices surged nearly 20%.
- Electronics: Laptops and phones are seeing steady climbs as components from Asia get slapped with those "secondary" levies.
Are We Reshoring Jobs?
This was the big promise. The idea was that if we make it too expensive to buy from China or Mexico, companies will just build factories in Ohio or South Carolina.
Is it working? Well, sort of, but it’s slow.
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Manufacturing leaders, like those surveyed by Grant Thornton, are definitely shifting. But they aren't always moving back to the U.S. Instead, many are "friend-shoring" to places like Southeast Asia or India to dodge the heaviest China-specific hits. In fact, China just reported a record $1.189 trillion trade surplus for 2025. Even with the massive U.S. tariffs, they just found other people to sell to.
Meanwhile, American manufacturers are in a tough spot. If you run a factory in Pennsylvania that uses specialized German steel, your costs just went through the roof. You might want to hire more people, but your margins are being squeezed by the very taxes meant to "help" you. It’s a bit of a Catch-22.
The SCOTUS Factor and the "Data Fog"
Here is something nobody talks about enough: the legal drama. Right now, as we sit here in January 2026, the Supreme Court is mulling over whether these tariffs are even legal under the International Emergency Economic Powers Act (IEEPA).
The uncertainty is killing business investment. Why would a CEO spend $500 million on a new plant if the tariff structure might vanish or double next month? Federal Reserve Chair Jerome Powell recently called it a "data fog." We had a government shutdown in late 2025 that messed up the numbers, and now we’re all just waiting for the high court to decide if the President actually has the power to tax everything that crosses the border.
The Verdict on the Trade Balance
If the goal was to kill the trade deficit, the results are... mixed.
Imports are down—Penn Wharton says they could drop by $6.9 trillion over the next decade. That sounds like a win for the "America First" crowd. But if we aren't importing the machines we need to build stuff here, our own GDP growth slows down. The Tax Foundation expects a 0.7% to 0.8% drop in long-run GDP because of these trade wars.
Basically, the economy is becoming more "closed." We're buying less from them, but we're also producing less efficiently because we don't have access to the cheapest global parts.
What You Should Actually Do Now
If you're trying to navigate this as a consumer or a business owner, "wait and see" isn't a strategy. You've gotta be proactive.
For Households: Lock in prices on major durables now. If you’re planning a kitchen remodel or need a new car, the 2026 inflation forecasts suggest that the "peak" of tariff-driven price hikes hasn't fully arrived yet. The inventory cushions are gone. What you see on the tag today might look like a bargain by July.
For Business Owners: Audit your supply chain immediately. If you’re relying on "Entry 1" imports from countries currently in the crosshairs—like Mexico, Canada, or China—you need to look into Foreign Trade Zones (FTZs). These allow you to defer or even eliminate duties on goods that are re-exported. Also, keep a very close eye on the SCOTUS rulings this month; a "strike down" would mean a massive, immediate shift in your cost of goods sold.
For Investors: Watch the sectors that are "tariff-exempt" or have high domestic content. The 2025-2026 trend shows that companies with heavy international supply chains are lagging behind "Main Street" businesses that source locally. Diversify away from heavy importers until the "data fog" from the Fed lifts later this spring.
Tariffs are a blunt instrument. They're raising money for the Treasury, sure, but they're also rewriting the rules of what things cost. Whether that's "working" depends on if you value a smaller trade deficit more than a smaller grocery bill.