The Lingering Impact of Trump’s Tariff Strategy on Consumers
As the conversation on tariffs and trade policy continues to dominate economic headlines in 2025, renowned economist Mohamed El-Erian has shed light on a critical aspect of former President Donald Trump’s tariffs that may have far-reaching consequences for American consumers and investors alike. Despite the visible headlines over the last few years, El-Erian contends that the full ‘tax’ impact from these tariffs has yet to fully materialize in the marketplace and everyday life.
Unlike previous assumptions that tariffs would cause an immediate jump in consumer prices, El-Erian explains that the short-term economic data has not yet captured the eventual squeeze on spending power. This subtle yet persistent economic pressure, he warns, could become more pronounced as supply chains adjust, importers exhaust their existing inventories, and global markets respond to ongoing trade restrictions. Investors in major ETFs like the Invesco QQQ Trust (NASDAQ:QQQ) and SPDR S&P 500 ETF (ARCA:SPY), along with everyday buyers, may not yet realize the true, compounding effect of these fabric policy shifts.
How the ‘Hidden Tax’ Could Unfold
El-Erian points out that tariffs often work their way through the economy over time. Initially, companies absorb some of the increased import costs to maintain market share. But as these pressures accumulate, price hikes at the retail level may become unavoidable. This eventual move could manifest as either direct price increases on consumer goods or subtle reductions in quality and quantity—a phenomenon sometimes dubbed “shrinkflation.”
Moreover, businesses facing long-term supply challenges may opt to pass these increased costs down the value chain. This ripple effect could eventually eat into consumers’ disposable income, leading to reduced spending and possibly affecting sectors reliant on consumer confidence. Notably, investors are increasingly scrutinizing these signals, especially given the outsized influence of trade-sensitive technology and industrial components that populate the portfolios of QQQ and SPY.
Implications for Investors and the Economy
Given these strategic shifts, analysts recommend both investors and consumers remain vigilant. For market participants, keeping an eye on earnings reports from companies heavily involved in cross-border trade remains crucial. Similarly, consumers should consider how product offerings evolve and what that signals about changing cost structures. With central banks around the world also reacting to ongoing trade disputes, broader market volatility could become more pronounced as the reality of delayed tariff effects sets in.
In short, while the sticker shock from tariffs has not yet made headlines, Mohamed El-Erian’s warning should prompt both investors and consumers to remain watchful as the next chapters of US trade policy play out through both the stock market and store shelves in the months to come.
