Trump tariffs cost US economy, warns Moody's
- Mark Zandi of Moody’s Analytics said on May 5 that a year of post-“Liberation Day” data now shows Trump’s tariffs have significantly damaged the U.S. economy. - Zandi’s clearest warning was jobs and prices — payroll growth outside healthcare has stalled, while inflation has climbed back to about 3%. - The threat is widening, too — Andrew Puzder says 25% tariffs on EU cars and trucks could arrive soon.
Tariffs are back at the center of the economic argument — not as a campaign slogan, but as a bill that is starting to show up in jobs, prices, and investment decisions. That is the point Mark Zandi at Moody’s Analytics made this week when he said the U.S. now has a full year of evidence from Trump’s “Liberation Day” tariffs. His conclusion was blunt: the damage is no longer theoretical. And just as that argument is landing, the White House is threatening to widen the fight again with a 25% tariff on European cars and trucks. (independent.co.uk) ### What is the actual news here? The immediate news is twofold. First, Zandi said on Monday, May 5, that a year of economic data since April 2, 2025 — the original “Liberation Day” tariff announcement — now points to meaningful harm from the policy. Second, U.S. ambassador to the EU Andre(independent.co.uk)ade deal. (independent.co.uk) ### Why does Zandi think the damage is real now? Basically, because enough time has passed to stop arguing only in forecasts. Zandi says job growth has come close to a standstill outside healthcare, and inflation has moved back up instead of cooling cleanly toward the Fed’s 2% target. That is the ugly combination tariffs are always accused of creating — slower growth and higher prices at the same time. (dnyuz.com) ### Aren’t tariffs also bringing in money? Yes — and that is why this fight is politically durable. Tariffs have raised a lot of customs revenue. The Budget Lab at Yale says the 2025 tariffs brought in an estimated $214.7 billion above the 2022-2024 average by (dnyuz.com)ment collects more, while households and importers absorb a lot of the cost. (budgetlab.yale.edu) ### So who actually pays? Not some abstract foreign entity. Importers pay at the border, and then a big chunk gets pushed through the system — into retail prices, factory inputs, or thinner profit margins. Yale’s tracker estimates tariff pass-through to imported consumer goods prices was substantial in 2025. Think of it less like a fine on another country and more like a sales tax that hits in messy, uneven ways. (budgetlab.yale.edu) ### Why are EU car tariffs such a big deal? Because autos are politically sensitive and supply chains are tangled across the Atlantic. A 25% tariff on EU vehicles would not just hit BMW, Mercedes-Benz, Volkswagen, Volvo, or Stellantis exports. It would also pressure dealers, parts suppliers, logistics firms, and U.S. plants that (budgetlab.yale.edu)alry and deeper into allied trade. (bloomberg.com) ### What changed from last month? A month ago, a lot of the conversation was still about market volatility and investor psychology one year after “Liberation Day.” Since then, the debate has shifted back toward concrete economic effects and the next tariff escalation. CNBC noted in April that(bloomberg.com)policy threat is becoming specific again — especially in autos. (cnbc.com) ### Is everyone seeing the same labor-market hit? Not exactly. This is where the story gets more nuanced. Zandi is making a stronger causal argument about broad economic damage, while Yale’s tariff tracker says there is not yet definitive proof of a large aggregate labor-market effect, even though tariff-exposed (cnbc.com)contested part of the case. (dnyuz.com) ### What matters next? Watch two things. One is whether the EU deal gets ratified fast enough to avoid the 25% auto tariff threat. The other is whether inflation stays sticky while hiring stays soft. If both happen together, the tariff debate stops being about trade ideology and turns into something more basic — whether the U.S. is choosing higher costs and slower growth on purpose. (bloomberg.com) The bottom line is simple. The argument over Trump’s tariffs has moved out of the hypothetical stage. Moody’s says the economic bruise is already visible, and the next round could land on one of the world’s biggest manufacturing supply chains. (independent.co.uk)
