President Trump's confrontational approach to tariffs has dominated the transatlantic relationship since he returned to the White House in January.
Following months of negotiations between EU and US officials, an agreement in principle was reached on 27 July in Scotland, with a follow-up "framework agreement" announced on 21 August.
A costly trade war was averted, but it still left a baseline 15% tariff on most European exports to the United States.
Many issues remain unresolved and much is shrouded in uncertainty, not least since Donald Trump has a history of breaking trade agreements that he has signed.
So are tariffs actually working for the US president, or has the flurry of horse-trading that followed meant things have more or less stayed the same for industries in European countries?
To start with, EU officials insist negotiators will be working hard to get as many exemptions as possible from the 15% rate, and to get more products down to the zero-for-zero rate, which was Brussels’ original ambition.
Despite that, there’s been a heated debate on whether the EU should have taken a more confrontational approach to the negotiations.
Critics have accused Brussels of failing to stand up to President Trump and failing to use more powerful tools to threaten the US services and tech presence.
EU officials argue that this would have caused a costly trade war, pitting one member state against another, and could have prompted Mr Trump to pull support for Ukraine in retaliation.
The European Commission continues to argue that the framework agreement provides exporters with "short-term stability".
How have Irish companies been preparing for the new regime?
The US is Ireland’s main export market, with goods valuing €72.6 billion being shipped there in 2024.
Most of those goods were subject to a low or zero tariff rate, meaning that Irish companies had minimal customs or compliance problems when exporting.
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Between President Trump's inauguration in January and his so-called "Liberation Day" tariff announcement on 2 April, Irish companies were hoping for the best - then fearing the worst, once it looked like a 10% baseline tariff would be the new normal.
"Companies would have accessed the US market with very low to minimum tariffs, and now suddenly you're hit with 10% depending on the industry," says Carol Lynch, a partner in BDO who specialises in customs and international trade.
"Worse was not knowing where that was going to go. Would it go to 30%? Where was it going to land?"
That meant the agony of trying to game the system, when to raise prices, when to hold off on distribution.
So what are the broad elements of the EU-US trade deal?
On 21 August, the main details were issued in a joint statement.
The US would cap tariffs on most European imports - not at 10%, but at 15%.
While that's better for EU manufacturers than the 30% tariff that Mr Trump threatened in July, it is still a big jump from the average tariff on European goods pre-Trump, which stood at 1.47%.
EU officials point out that the 15% is all inclusive.
That means it incorporates what is known as the Most Favoured Nation (MFN) tariff, which is the basic term used by the World Trade Organization to denote standard levies that apply to countries with which the US does not have a free trade agreement.
For example, the average US MFN tariff on cheese is 14.9%. For those countries who have agreed a 10% baseline tariff, that would come on top of the MFN rate of 14.9%, meaning the overall tax for cheese would be 24.9%.
However, since the EU tariff rate is all inclusive, it would be only 15%.
Officials in Brussels admit the 15% tariff is "not perfect", but better than what many other countries have received.
By comparison, the UK baseline tariff is 10%. However, that - say EU officials - is not an all-inclusive rate, meaning that - depending on the sector - the tariff on UK exports to the US will be 10%, plus the MFN rate.
In reality, since the average US MFN rate is 4.8%, there is not a huge difference between the UK and EU deals (14.8% versus 15%, notwithstanding the cheese factor).
The "framework agreement" is not legally binding, but sets out the direction of travel for both the EU and US to negotiate a more fully fledged and comprehensive deal.
However, EU officials say the US side is making the legal changes necessary so that the 15% baseline tariff takes effect immediately, while the EU’s commitments on US imports will only take effect once the overall deal is complete.
Elsewhere, Washington has promised to exempt aircraft and aircraft parts, as well as generic pharmaceuticals, from higher taxes.
The EU says it will be pushing hard to have tariffs on other sectors brought down to zero, such as medical devices, wines and spirits.
For its part, the EU has agreed to eliminate tariffs on all US industrial goods and to provide preferential market access for a wide range of US seafood and agricultural exports.
Europe also says it will buy $750bn worth of US energy, including liquefied natural gas, oil and nuclear energy products until 2028, as well as at least $40bn worth of AI chips.
European companies are also "expected" to invest an additional $600bn in strategic sectors in the United States, mostly defence.
These are commitments with question marks attached, given that it is the commercial sector which buys energy, not the EU.
How European companies can be encouraged to invest in strategic US sectors remains unclear.
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While the 15% is the baseline tariff for most EU exports to the US, what about sectoral tariffs on, for example, pharmaceuticals?
Here we can take a look at the different sectors, especially those critical to Irish exporters.
Pharmaceuticals:
There are currently no tariffs on pharmaceutical goods exported to the US from Europe.
The pharma sector, however, has long been in the crosshairs of the Trump administration and the president in April announced a so-called Section 232 investigation into pharma imports (Section 232s look at the risk to national security if there is an over-dependency on overseas imports in a particular sector).
Such inquiries usually end up with higher tariffs on imports. While the Section 232 investigation has yet to conclude, the EU-US deal means that, whatever the outcome, any tariff on pharmaceuticals will be limited to the 15% ceiling (the same applies to semiconductors).
"It is our understanding," says an EU official, "that [the Section 232 investigation result] will happen very, very soon. That will be a very important moment for us to showcase how our insurance policy is quite effective."
EU officials point out that the UK deal does not include such a commitment in writing.
Nonetheless, as with everything else, 15% is a lot worse than zero.
The European pharmaceutical lobby EFPIA says it will cost the sector €18bn, on top of the fact that there are no exemptions for innovative medicines, and no clarity on possibly higher tariffs in the future.
The organisation warns that in the short term, with pharmaceutical companies tied into long-term pricing deals with national health systems, they may be forced to absorb such costs.
"Adding barriers to highly functioning and complex supply chains is not a route to national resilience, increased manufacturing or better patient care," says EFPIA Director General Nathalie Moll.
"They impact our ability to collaborate on discovering new treatments to tackle global health challenges, with billions of euros diverted away from medical research."
The US has agreed to apply only MFN tariffs to "generic pharmaceuticals and their ingredients and chemical precursors", but even this was of meagre comfort to the Irish pharmaceutical sector.
"A lower or zero tariff on generic products and their ingredients, leaving open higher tariffs on innovative medicines, is misguided and does not support investment in innovation and patients' interests in either the US or the European Union," says the Irish Pharmaceutical Healthcare Association (IPHA).
The problem is that there is no clarity about how the framework agreement will define "generics".
According to how trade deals work, each product line is given a different code.
"We have to see the codes to know what those products are and how many are covered by the agreement," says Ger Brady, chief economist with Ibec, the employers' group.
"That could be anywhere between a few 100 or more than 10 million. We have no idea yet how many are included in those different definitions, so we won't really know how much Irish trade falls under those agreements until we see the executive orders from the White House."
Medical devices:
Ireland exports 40% of its medtech sector to the US, a trade worth over €8bn, and those products will now be subject to a 15% tariff rate.
This will be "felt across the industry, and in turn, have significant and complex legal implications," according to a note by law firm McCann Fitzgerald.
"The deal will be seen by many in Europe as a poor outcome compared to the initial European ambition of a zero-for-zero tariff deal, although it is better than the threatened 30% tariff that would have applied to all exports from the EU to the US from 1 August 2025 in the event of no deal."
Medical devices tend to operate at a lower profit margin than pharmaceutical companies and are often locked into longer term contracts with the US health sector.
"It's a big challenge for them," says Ibec Chief Economist Ger Brady, "because in a lot of cases where they're selling into the US health system they're in three to five year contracts, so they can't pass the cost on".
Auto:
Before President Trump took office, the average US tariff on European cars was 2.5%.
In March, he announced 25% tariffs on EU cars and car parts (adding the 2.5% MFN rate brought the total to 27.5%).
Washington has agreed to lower the tariff from that cumulative 27.5% to 15%, but only once the EU has started legislating to eliminate tariffs on all US industrial products, including cars, and given preferential access to seafood and agricultural exports, including pork, dairy and tree nuts.
For now, the US appears willing to retroactively trigger the 15% on the basis simply of the European Commission tabling legislation.
However, the legislation will take time and will require the consent of member states and the European Parliament. That could cause problems ahead.
Nevertheless, the European car lobby welcomed the lower tariff.
"This confirmation is a positive step that provides greater certainty for our industry," said Sigrid de Vries, director general of the European Automobile Manufacturers' Association (ACEA).
"It is now crucial that the commission proceeds to implement the EU’s commitments without delay, mitigating the tariff impact which already has cost automakers millions of euros in duties every day."
EU officials also point out that there is no tariff rate quota (TRQ) for the auto or auto parts sector.
In other words, there won’t be a limit on the volume of European cars or car parts at which the 15% tariff applies (by contrast 10% tariff on UK exports is limited to 100,000 cars per annum).
"The 'no quota’ approach is quite important for us, given the size of our industry and our competitive advantage in producing good cars," says a senior EU official.
However, other aspects of the framework agreement have alarmed road safety campaigners.
Both the EU and US say they "intend to accept and provide mutual recognition to each other’s [automobile] standards" with the prospect of technical cooperation between standards development organisations on both sides of the Atlantic in order to "[develop] standards for the transatlantic marketplace in key sectors of mutual interest."
The European Transport Safety Council (ETSC) has already condemned the move as putting European lives at risk, given that the mandatory EU requirements of automated emergency braking, lane-keeping assistance and pedestrian protection are not guaranteed under US rules.
"Europe now risks being flooded with oversized, under-regulated US pick-up trucks and SUVs - vehicles that are heavier, more dangerous to other car drivers, pedestrians and cyclists, and completely out of step with Europe’s vision for safer, more sustainable mobility," says ETSC Director Antonio Avenoso.
Steel:
Steel and aluminium are key sectors for the Trump administration. The White House raised existing tariffs on European exports from 25% to 50%, effective from 4 June, with a 25% ad valorem duty on derivative products effective as of 12 March.
Following the framework agreement, the 50% tariff still applies.
However, some pre-existing exemptions, granted last year, remain. These apply to speciality European products which are essential to US industry.
EU officials say they are negotiating hard to get more European products into the exemption list, and to secure expanded steel and aluminium quotas at which the MFN rate, which is close to zero, will only apply (as opposed to the 50% rate).
They say a "goal" of the framework agreement is to get the tariff rate quotas (TRQs) back to where they have been historically.
According to the joint statement, both sides "intend to consider the possibility to cooperate on ring-fencing their respective domestic markets from overcapacity, while ensuring secure supply chains between each other, including through tariff-rate quota solutions".
European producers are not convinced.
VDMA, which represents 3,600 German and European mechanical and plant engineering sectors, says the US has added 150 products, such as motors, pumps, industrial robots, agricultural and construction machinery, to the list of goods attracting the higher 50% tariffs, with fears that drones and wind turbines could be next.
"For many companies in the manufacturing sector, such as machinery and equipment manufacturing, this means that their entire US business is at risk," says VDMA President Bertram Kawlath.
"The harm caused by [tariffs], along with the prospect of still more in the months to come, are sending key machinery sectors hurdling toward the precipice of an existential crisis."
For Irish manufacturers, the big concern is if there are elements of steel, aluminium or copper in their product which will attract a 50% tariff rate.
On 19 April, the Trump administration quietly announced that the 50% rate would be applied to 407 new kinds of products such as fire extinguishers, machinery, construction materials and specialty chemicals that either contain, or are contained in, aluminum or steel.
"Irish manufacturers are having to ask, do I have an element of steel in my packaging, for example?" says Carol Lynch of BDO. "How do I work out what the value of that is? That's not clear as yet."
Aviation:
Aircraft and aviation parts will be exempt from the 15% tariff rate under the deal, which the industry on both sides of the Atlantic has welcomed, given the complex global supply chains which underpin the sector.
The aerospace sector has operated at mostly zero tariffs since a 1979 agreement which resulted from the early Boeing/Airbus rivalry.
Despite strong hints from the Trump administration that the airline industry would be exempt, Boeing had brought forward the delivery of 25 737 Max aircraft to October in part due to concerns about tariffs, Ryanair Chief Executive Michael O'Leary told a news conference on Wednesday.
"Aerospace is the biggest export for the US economy as a single commodity, so the consequences of tariffs would have been shooting themselves in the foot," says an industry source.
"This was a sector they really didn't want to screw over: they wanted a zero tariff regime in place, because it would have been so bad for Boeing if the EU had countered with their own tariff."
The exemption was welcomed in Dublin. "Given the significance of the airline sector to Ireland, a specific carve-out for aircraft and aircraft parts is also welcome," Taoiseach Micheál Martin said.
It’s understood that Ryanair’s purchase orders, and those of Irish leasing companies, have resulted in the delivery of over 300 aircraft in the past three years, around one fifth of Boeing's deliveries during that period.
Big Tech:
This is one of the most toxic issues in the US-EU relationship.
President Trump has long vilified the European Union for its regulation of US tech giants, rules which fall across the competition, taxation and freedom of speech spheres.
US negotiators had pressed the EU throughout the talks to change its rules which, they argued, disproportionately affected American corporations.
In particular, they took aim at the Digital Services Act (DSA) which requires tech firms with vast user-bases to police their platforms more aggressively in order to protect minors and to prevent systemic assaults on democratic and electoral systems, safeguards which the Trump administration views as censorship.
The framework agreement does cover network usage fees and duties on e-commerce, but Brussels insists it held firm and refused to negotiate on either the DSA or its sister legislation, the Digital Markets Act (DMA).
"What is not in the agreement is either the DMA or DSA, or measures that some member states have in regards to digital taxation," says a senior EU official. "The EU upholds its regulation and our right to regulate."
However, within days of the agreement being announced, President Trump - without naming the EU - threatened tariffs and export controls on countries whose taxes or laws "discriminate" against US tech companies.
The European Commission quickly responded that the EU's rules on the digital space were not part of the trade agreement.
"It is the sovereign right of the EU and its member states to regulate economic activities on our territory which are consistent with our democratic values," European Commission spokesperson Paula Pinho said on Tuesday.
President Trump’s outburst on social media will have alarmed those who believe he cannot be trusted to uphold a deal. The EU could retaliate if he singles out Europe for action. Time will tell.
Food and Agriculture:
The 15% baseline tariff is bad news for the Irish agrifood sector which, last year, exported €1.9bn worth of food and drink products into the US market, around 11% of total food and drink exports.
"While the proposed tariff rate of 15% is lower than the threatened 30% rate, it still represents a significant challenge for the Irish agri sector on a number of fronts," says Irish Farmers' Association President Francie Gorman.
"Given Ireland's reliance on the US market, both in agriculture and beyond, its impact will be significant on Irish farm families, both directly and indirectly."
The IFA is also concerned about the US gaining "preferential access" to the European market for its agrifood sector.
Indeed, European consumers have long feared the arrival of chlorinated US chicken and hormone beef entering the EU as part of any trade agreement.
However, there is nothing in the framework agreement which provides for such imports.
"We're not talking about beef, we're not talking about poultry," says a senior EU official involved in the negotiations. "None of the sensitive agricultural products are covered in this agreement."
Two "non-sensitive" products are treated separately: lobster and bison. The EU and US reached an agreement in 2021 for tariff- and quota-free access for US lobster to the European market. With that arrangement expiring, the EU agreed to extend it as part of the framework agreement.
The US will also be allowed to export more bison meat to the EU market, given that it is not something European farmers produce and that it is not a popular product among consumers.
Ahead of the 21 August statement, officials flagged that there would be a general reference to easing the EU's sanitary and phytosanitary (SPS) requirements for US agrifood exporters. In the event, the reference did not appear.
Officials have, in the meantime, said the EU would make it easier for US exporters to comply with food safety rules by streamlining certificates for certain products.
"Our levels of protection remain the same," says a senior EU official."But how do you comply with the rules? That is an area where we are always ready to do better so that is where we will look at cutting some of the red tape in response to some very specific concerns that the US has raised."
Again, the details remain to be negotiated.
Wine and Spirits:
This was a painful part of the negotiations for the EU, and for Irish exporters.
Historically, alcohol tariffs on both sides of the Atlantic were kept at zero, and transatlantic trade surged 450% since the 1990s.
Tit-for-tat tariffs were applied by both sides of up to 25% on whiskey and bourbon as a consequence of the Boeing/Airbus rivalry, as well as steel and aluminium, disputes in the late 2010s, but in the current talks EU negotiators pushed hard for wine, beer and spirits to be exempt from the 15% tariff, with fierce lobbying from Ireland, France and Italy.
However, when the four-page joint statement appeared on 21 August, there was no mention of Irish whiskey, French cognac or Italian prosecco, meaning the 15% tariff will apply (the fact that President Trump had dropped his threat to impose 200% tariffs was scant comfort).
"This was a critical moment to reaffirm and reinvigorate our shared commitment to fair and reciprocal trade and give the transatlantic spirits sector the boost it needs to get back on a stronger growth path," said Director General of spiritsEUROPE Hervé Dumesny.
"While we appreciate the progress made in de-escalating broader trade tensions, every month of delay in restoring the zero-for-zero tariff agreement for spirits holds back growth, investment and consumer choice on both sides of the Atlantic."
Irish whiskey exports in 2024 were worth nearly €1bn, about 40% of which was accounted for by the US market (5.7 million cases in 2023). Irish operators are now up against Scottish whisky exporters who are coping with the smaller 10% tariff (with no MFN add-on).
Denis O'Flynn, a former senior executive with Pernod Ricard and currently a director at Clonakilty Distillery, estimates that the bigger players - like Jamieson and Powers - will be able to absorb the shock of 15% tariffs, but it will be more challenging for around 20 distilleries in the smaller, craft whiskey sector, who ship, at most, 200,000 cases to the US each year.
"They're in places in rural Ireland that are keeping people employed. I'm thinking of Clonakilty, I’m thinking of Dingle, places where otherwise it might be difficult to keep people there. Each of them are employing about 30 people, keeping small communities going."
He says the craft sector is potentially steering its export horizons to Japan, Nigeria and South Africa since the US market - already a competitive arena - will become "prohibitively expensive".
Talks on alcohol will continue. "The United States and the European Union agree to consider other sectors and products that are important for their economies and value chains for inclusion in the list of products for which only the MFN tariffs would apply," the joint statement said.
An EU official said: "We would hope and expect that [tariffs] can go down to their MFN rates. And those MFN rates are generally relatively low for wines - it really depends on the product."
When will there be more clarity on the final agreement?
It's clear the framework agreement is a starting point and there will be relentless negotiations to come.
President Trump’s executive orders may spell out in more detail what products qualify for zero tariffs on both sides, and that could take several weeks.
EU officials say they are prioritising steel and aluminium, as well as the wine and spirits sectors, in terms of getting down to zero-for-zero tariffs (ie both sides reducing duties to zero, or as close to zero as politically possible), or, in the case of steel, agreeing quotas that attract the lower rate.
Officials in Brussels say that retaliatory measures, which were periodically paused in order to encourage negotiations, remain available.
"We are keeping in the background our own countermeasures for whenever we need them," says a senior EU official. "These can be unsuspended whenever we need to unsuspend them at any point in time."
What is the outlook now for Irish exporters to the US?
The Government expressed relief that the pharmaceutical industry, by far the largest and most valuable export sector to the Irish economy, will not be hit with tariffs beyond 15%.
Large Irish multinationals in the pharmaceutical and food industries - those in higher profit margin sectors and with teams of advisors expert in customs and tariffs - will be better placed to absorb the shock.
However, even then the lack of certainty is particularly acute: 75% of Irish trade with the US is in those pharmaceutical and semiconductor sectors which are still subject to Section 232 investigations, meaning there is still no clarity on precise tariff rates.
Medium sized sectors will be more exposed.
"The Irish homegrown exporting base will be hit badly," says Carol Lynch of BDO. "You’ve spent years building that market up. You may be a unique product that doesn't have a competitor, but if there's an alternative product on the US market, consumers are not going to pay a premium price unless there's a really good reason."
Exporters will be forced to look to new markets - Canada, Mexico, Japan, Singapore - or even to contemplate setting up a US subsidiary.
Enterprise Ireland has promised grants of up to €35,000 and €150,000 respectively to help exporters cope with the new 15% tariff or to develop markets elsewhere (the agency believes that 450 of its 950 client companies will be "most impacted" by the new tariff rate).
Ibec remains cautiously hopeful that, pending the outcome of the Section 232 investigation into pharmaceuticals, the final tariff could even be below 15%.
"It can be anywhere between zero and 15%," says Chief Economist Ger Brady.
"The agreement is clear: there's a cap at 15%. Obviously, there is a lot of volatility in policy making in the US at the moment. We have no massive expectation it'll be below 15%, but there is still the possibility it could be. There's no reason the White House couldn't set it lower."
Finally, are President Trump’s tariffs actually working for the US economy or not?
One of the most frustrating aspects of the negotiations from an EU point of view was not knowing what the tariffs were for: to raise revenue for the US Treasury in tackling the federal deficit, or even to do away with income taxes? To bring manufacturing back to the United States? To give the administration leverage to bully or cajole trading partners into other concessions?
It is probably a mix of all three, but the jury is out on whether one or all objectives will have been successful.
On the first count, the higher tariffs are already producing increased revenue with data showing that, in June, tariff revenues were $28bn, triple the monthly figure seen in 2024.
The Peterson Institute for International Economics reports that average global tariff revenue for the US increased by 8.9% between January and June this year with the Treasury raking in $94bn, when taking into account cost, insurance and freight handled by the importer.
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Those countries harder hit are, naturally, contributing more to US coffers: revenue from tariffs on Chinese goods has increased by 37.7% in the same period, while the EU accounts for an 8.5% increase.
While there has been a surge in tariff revenue, it will still pale in comparison to what the Treasury earns through income tax (in 2025 individual tax returns are expected to provide 51% of federal revenue, compared to tariffs, which will provide 2.7%, an increase in 2024 but still a small sliver of overall revenue).
The Peterson Institute also suggests the $94bn in tariff revenue will only make a tiny dent in the US national debt, which is projected to be $1.86 trillion in 2025.
During the launch of his so-called Liberation Day tariff bazooka on 2 April, President Trump boasted that jobs and factories would come "roaring back" to the United States on the basis that they would avoid the higher tariffs on imports.
"We will supercharge our domestic industrial base, we will pry open foreign markets and break down foreign trade barriers, and ultimately more production at home will mean stronger competition and lower prices for consumers," he said.
Reshoring can mean corporations moving entire plant operations to the US, or sourcing more US inputs when finishing the product.
Some companies (and countries) have, in the face of eye-watering tariff threats, announced they would move operations to the US or increase investments there, but there are complex factors at play and wholesale reshoring is not guaranteed.
The biggest drag on reshoring is the tight US labour market and a lack of skilled workers. A CNBC survey of 380 US businesses in April found that a lack of skilled labour was the second-biggest hurdle to reshoring, followed by the high cost.
On 1 June, the Reshoring Survey found that US firms would reshore 23% of imports if there was a universal tariff hike of 15%, while manufacturing companies would consider reshoring 30% of products if the US workforce was bigger and more skilled.
Moving entire production plants - buildings, staff, technology - can be very expensive and more likely within the capabilities of large global corporations which already have operations in the US.
During Mr Trump's first term a raft of tariffs did not result in large-scale investment in domestic production.
According to an oft-cited 2024 paper by Panos Kouvelis, Emerson Distinguished Professor of Supply Chain, Operations and Technology at Washington University, the influence of tariffs on reshoring decisions depends very much on where the tariffs bite in the supply chain process.
"Tariffs imposed at raw material and/or component level - such as on steel, aluminum, silicon, ingots, etc - have detrimental effects on reshoring investments," he said.
"Tariffs increase the costs of any manufacturer - global or domestic - when using the raw materials and/or components in producing finished goods for the local market."
In other words, if the tariff hits components of - say, electric vehicles and solar panels - the lack of a strong domestic supply chain will militate against manufacturing in the US.
As the European Commission has relentlessly argued, it is the importing US company, and not the exporting country, which pays the tariff. If US importers pass on the cost to consumers, does that then push up US inflation?
Probably, but not yet.
"Many importers do not pass the rising cost of new tariffs on to their customers until inventory used for production bears the higher cost," say Gary Clyde Hufbauer and Ye Zhang, authors of the Peterson report.
"In other words, old inventory is not marked up to reflect the tariff cost of new inventory. Given that practice, the impact of higher tariffs on consumer prices ... is delayed for several months after the tariff announcement. The delay is still longer if importers choose to absorb the tariff for a while."
That seemed to be reflected in the July inflation figures, with companies having stockpiled goods at the lower tariff and absorbed the extra costs themselvs.
But there was a different picture in August, when the new tariffs started to take effect. While inflation remained at 2.7% - compared to the previous August - what's called the "core" Consumer Price Index (CPI), which doesn’t count volatile food and energy prices, rose by 0.3% compared to July, with an overall increase of 3.1% compared to one year ago.
This week, however, data showed that inflation rose in August at the fastest pace since the beginning of the year ahead with consumer prices edging up to 2.7% in the year to August compared to 2.7% the previous month, with the cost of cars, household furnishings and grocery staples all increasing.
This week, the Fed is expected to cut interest rates by a quarter percentage point.
Economists fear that inflation will rise and lay-offs will follow as the tariffs start to bite in the third quarter.
On 9 September, the US Labour Department reported that the economy had added 911,000 fewer jobs than initially estimated in the year through March.
That followed a report the previous week that employers had added just 22,000 jobs in August, fewer than expected, while the unemployment rate rose from 4.2% to 4.3%.
Likewise, Mr Trump’s boast that he can bend allies and foes alike to his will through tariffs may ultimately harm America’s statecraft.
Swathes of western and Asian markets embedded themselves in a global system underwritten by relatively friendly access to the US market and a rules based trading order backed by hard power. In return, they were willing to invest in the US economy and buy massive amounts of American debt.
President Trump has taken a wrecking ball to that paradigm with the risk that US allies will soon think twice about investing in the United States or buying US treasury bills, especially if the administration’s response to their appeasement of its bullying tactics is further threats and insults.
Most starkly, the 50% tariffs slapped on India, ostensibly in response to its purchase of Russian crude oil, not to mention President Trump’s overtures to Pakistan, have ruptured decades of closer cooperation between Washington and New Delhi, and pushed Prime Minister Narendra Modi into the arms of Chinese President Xi Jinping.
That in turn will have grave implications for US supply chains and access to rare earths and other vital minerals.
The Trump administration remains bullish that tariff revenue will help reduce the national debt and that reshoring will boost economic growth for decades, which, along with advances in AI, will pay for huge tax cuts.
That may well be the case. However, the US economy could flip the other way: tariff-driven inflation could push up interest rates, in turn making repayments on the US multi-trillion dollar debt spectacularly expensive.
"The United States is approaching the point at which the national debt could undermine not only the country’s economic stability but also the things that have sustained its global power for so many decades," warns Professor of Economics at Harvard University, Kenneth S Rogoff, in this month’s Foreign Affairs magazine, "including the military spending that it has leveraged in many ways to maintain the dollar's formidable influence over the global financial system since World War II."
The Liberation Day tariff adventure will be a rocky one.
