If Trump doesn’t reach deals with big U.S. trade partners before August 1 and instead imposes threatened higher tariffs, I expect U.S. trade war costs will finally start to bite. An analysis: 1. Credit to Trump, to date trade war costs have been lower than initial estimates. There are several reasons for this: (a) tariff front running meant many imported goods sold during the first half of 2025 were not subject to Trump’s tariffs; (b) he successfully dissuaded most foreign governments from seriously retaliating against U.S. companies and exports; and (c) the U.S. is a 70% services economy, so even big price hikes on imported goods only drive macroeconomic numbers so far. U.S tariff revenue in June was $27 billion, a 300% increase from June 2024. But in against the U.S. economy, $27 billion doesn’t have a massive macroeconomic impact. 2. So why do I think this comparatively low-cost situation will change? First, companies are selling off pre-tariff imports and a larger share of stuff sold during the second half of the year will be subject to Trump’s tariffs. Trump’s threatened rates are also significantly higher than the rates we see today. U.S. tariffs today are 6x-ish what they were in 2024, but they remain just half of Trump’s threatened rates, between the higher headline rates in the letters Trump has sent trading partners and the fact that 232 tariffs will cover a larger share of U.S. goods later this year. (About 20% of U.S. imports have been exempt from tariffs while 232 investigations are under way). 3. Second, the evidence is growing that over the longer term, consumers will bear many tariff costs: BLS import price data (collected on pre-tariff prices) shows a small increase in the recent price of non-fuel imports. If foreigners were eating tariff costs, import prices should be going down. The value of the dollar has fallen about 10% in 2025, undercutting arguments that a rising dollar might offset tariffs. There is some evidence that U.S. companies have temporarily eaten tariff costs. But recent corporate surveys and earnings calls indicate most companies are planning to pass costs into prices over the mid- to longer-term. 4. Third, foreign retaliation is coming. Credit to Trump for having dissuaded most retaliation so far, but the news coming out of foreign capitals clearly signals that absent deals, and certainly if U.S. rates do go up, retaliation will come. That is going to begin hurting U.S. exporting firms (as well as U.S. firms operating abroad), which have yet to feel much trade war pain. 5. Yale Budget Lab estimates that full trade war costs might be $2,800 per household in income losses strike me as quite plausible. 6. Trump can avert some costs by actually striking deals, particularly with larger trading partners like the E.U., Mexico, Canada, Japan, and Korea—the top 15 trading partners account for 75% of U.S. trade. But that will require Trump deciding to strike deals, rather than increasing trade war pain.