Impact of 2025 US tariff measures on consumers, producers

The cost burden following the implementation of the US trade tariffs affected not only American consumers, but also South African exporters, according to Zama Sangweni.

- Zama Sangweni

In our Absa AgriTrends Spring Edition report, we examined several potential outcomes of the 2025 tariff measures across different commodity groups.

One scenario that gained particular attention involved a partial absorption of tariffs by South African producers, a fraction absorbed by US retailers, and the remainder passed on to consumers. Initially, retailers strategically absorbed small cost increases to maintain sales volumes and customer loyalty, particularly for competitive or price-sensitive products.

However, as tariffs persisted and inventory stocks were depleted, retailers increasingly had to pass the higher costs on to consumers. Consequently, US consumer prices for affected agricultural imports rose. Analysts note that while tariff-driven price increases contributed to inflationary pressure, they were not the sole factor affecting US consumers.

The graph below illustrates the price impacts of tariffs on imported versus domestic goods. In late July, the imported goods price index hovered around 1,021 to 1,022, closely aligned with the domestic goods index's of 1,012 to 1,013.

RETAILERS INCREASINGLY HAD TO PASS THE HIGHER COSTS ON TO CONSUMERS

After the effective date of 7 August 2025 for implementation of additional tariffs, the imported goods index exhibits a steady upward trajectory, reaching roughly 1,025 by late August, while the domestic goods index remains largely unchanged.

The observed divergence indicates that the price adjustments were largely confined to imported goods, rather than reflecting broader inflationary pressures or general supply chain disruptions. Notably, there is no immediate spike on 7 August, suggesting that retailers initially mitigated the impact by absorbing tariff costs through existing inventory.