'Liberation day' one year later: What Trump's tariffs are costing America

MW 'Liberation day' one year later: What Trump's tariffs are costing America

By Joy Wiltermuth, Victor Reklaitis and Claudia Assis

U.S. home builders and car manufacturers are taking a hit. Tariffs haven't slashed the federal debt as promised.

The U.S. debt grew in the wake of President Trump's "liberation day," even as the automobile industry took billions in tariff losses and residential construction fell.

One year ago Thursday, President Donald Trump panicked markets with his "liberation day" announcement, a road map to increased U.S. trade protectionism and, he said, to preventing foreign "cheaters" and "scavengers" from looting the American dream.

In February, Trump's economic agenda suffered a blow as the Supreme Court ruled he had exceeded his authority in using a 1977 law to justify most of his tariffs. The White House quickly replaced those invalidated tariffs using other, temporary means, surprising some who thought the court ruling might have offered the administration a hand with its affordability push.

At last check, U.S. consumers still faced a 13.7% effective tariff rate, down from 16% before the Supreme Court decision, according to the Budget Lab at Yale. The average U.S. tariff rate on all goods before 2025 was 2.6%.

While Trump touted tariffs as a way to shrink the U.S. debt, slash the trade deficit and bring back manufacturing jobs, that isn't how things have worked out. Instead, construction materials for a new home now cost builders thousands of dollars more, U.S. automakers have written off billions in tariff losses and the U.S. national debt has grown to more than $39 trillion.

With that backdrop, Trump's fellow Republicans, in control of both chambers of the U.S. Congress, head toward the midterm elections in November. Yet with gas at the pump near $4 a gallon nationally, affordability looks increasingly like a wedge issue in America. The White House did not respond to requests for comment.

Despite the Supreme Court's decision, Trump is still able to slap tariffs on other countries' products as they are imported, based on sector-specific issues like automobiles and other trade-related statutes.

MarketWatch took a look at three essential areas as liberation day turns one year old.

Anxiety over home construction

The U.S. needs to build more homes, but construction fell last year.

The U.S. faces skyrocketing housing costs and a housing shortage that could take a decade to resolve, according to J.P. Morgan estimates. The tumultuous tariff landscape of the past year hasn't helped.

Instead, it has made it extremely difficult to pinpoint an exact tariff cost for building materials, said Ed Brady, CEO of the Home Builders Institute. "When you talk with builders, it's thousands of dollars," Brady told MarketWatch. "The bigger challenge is that uncertainty has frozen a lot of things."

Indeed, single-family construction declined by about 7% in 2025, according to the National Association of Home Builders. The trade group also pegged residential building-material costs as 3% higher on a yearly basis in February.

Large-scale home builders tend to have more protection against price volatility in construction materials, while smaller firms, which can't buy at the same volumes and often don't have long-term contracts locked in with their suppliers, are more vulnerable, Brady said.

Affordability remains a crucial constraint, especially with 30-year mortgage rates back above 6.2% and the Iran war unleashing a historic global oil shock.

Builders already were having trouble pricing new homes because of uncertainty around building costs, but now they also face higher oil prices, according to the NAHB's chief economist, Robert Dietz.

"It's frustrating, but the uncertainty itself is a cost," Dietz said. "When people are deploying capital, figuring out how much land to acquire or how many building permits to pull, they need to know how much the cost is to build a home."

Yet the building industry ITB remains in "decent shape" in terms of margins after a number of pandemic-era boom years, according to Nishu Sood, principal of research at John Burns Research & Consulting. Margins had gone as high as 27% to 28% but now were trending closer to a more normal level of about 20%. "It's not at 15%," Sood said, "which would indicate financial pressure that's difficult to sustain."

U.S. debt grows

Tariffs are bringing in revenue, but the U.S. national debt keeps growing.

Trump and his allies often have said the benefits of tariffs include the revenue that the import taxes bring in, as that can reduce the federal government's budget deficits and the national debt. The White House in August highlighted an analysis by the nonpartisan Congressional Budget Office that projected that the increase in tariffs during 2025 - meaning from "liberation day" levies and other Trump-imposed duties - could reduce budget deficits by $4 trillion over a decade if they remained in place. And there's no question that tariff revenue has been growing, with the Treasury Department reporting that it totaled $195 billion in the government's 2025 fiscal year, up from just $77 billion in the prior year.

However, there haven't been great improvements in the annual budget deficit and the national debt. The deficit in the 2025 fiscal year was $1.78 trillion, down only slightly from the prior year's $1.82 trillion in red ink. The national debt, meanwhile, topped $39 trillion in March. "Surpassing $39 trillion in gross debt is an embarrassing milestone that both parties have helped build over decades," said one watchdog group, the Committee for a Responsible Federal Budget.

Servicing the U.S. debt already costs about $1 out of every $5 in collected tax revenue, according to estimates from Torsten Slok, chief economist at Apollo Global Management. In a decade, servicing costs are expected to require about $1 out of every $4, according to the CBO.

What's more, the Supreme Court's February ruling that struck down Trump's "liberation day" tariffs has sparked major doubts about the revenue that the levies had delivered. U.S. Customs and Border Protection has been working to figure out how to process the refunds to importers that now are expected. Companies including Costco Wholesale Corp. $(COST)$ had sued the federal government asking for a refund if the tariffs were found to be unconstitutional.

The Trump administration has announced replacement tariffs that in large part make up for the duties that were deemed illegal because they relied on the International Emergency Economic Powers Act of 1977, but the new tariffs - which are based on Section 122 of the Trade Act of 1974 - are facing legal challenges of their own.

Eating the tariffs

Trump's tariffs on automobiles, auto parts and raw materials such as steel and aluminum hit U.S. automotive manufacturers at a particularly tricky stage. Not only are they facing stiff competition from China, changes to tax and emissions policies, and a tough transition to electric vehicles, but the U.S. consumer is also struggling to afford everyday needs, much less a new car.

And with gasoline prices now surging, consumers may be even more reluctant to make a purchase. So rather than pass the billions of dollars in tariff costs along to consumers, carmakers have chosen to absorb the blow. They are expected to largely hold the line on prices this year, too.

"They know that their customers are not going to stand for" price hikes, said Joseph Yoon, an analyst with Edmunds. "It becomes a question of losing market share for the automakers."

Basically, General Motors $(GM)$ and Ford Motor $(F)$, the two largest U.S.-based automobile manufacturers in terms of the number of vehicles sold, had to manage a total of more than $5 billion in tariff costs last year, without much relief expected this year.

GM said tariffs cost it $3.1 billion in 2025, and it estimates an additional cost of $3 billion to $4 billion in 2026.

Ford said its tariff impacts totaled $2 billion last year, and it is expecting another $2 billion in impact this year. As a company spokesperson explained in an email to MarketWatch, the 2026 tariff impact would have actually dropped to $1 billion, but a fire at one of its main U.S.-based aluminum suppliers forced it to source aluminum from overseas, which subjected it to $1 billion in aluminum-tariff costs.

Manufacturing data show the U.S. has continued to lose jobs in the past year.

But what's helping keep the car companies from raising prices, according to Erin Keating, an analyst at Cox Automotives, is that "the market is still very competitive, with makers chasing fewer buyers able to afford a new car."

Cox has estimated that U.S. automakers will sell an annualized 15.8 million vehicles this year, down from 16.3 million in 2025. This dynamic has been reflected in gross margins, or how much profit is derived from sales, for the companies. GM's margin fell to 6.9% in 2025 from 8% in 2024, while Ford's slid to 3.6% from 5.5%.

That doesn't mean prices for consumers haven't been creeping up. Destination and handling fees, for example, have climbed to $1,658 per vehicle this year, after rising to $1,551 in 2025 from $1,425 in 2024, Keating said. And car companies also have paused incentives and promotions.

In February, the average transaction price of a new car crept up 3.4% from a year earlier to $49,353, Keating said. That's the biggest year-over-year increase since the 9% jumps seen during the inflation-spike years between 2021 and 2023 but in line with typical price increases seen before the pandemic.

"A minority group of buyers is doing the majority of buying," said Edmunds's Yoon. Car dealers don't have it any easier, as nationwide discounts have dried up. "It's a tough time to be a car shopper, and it's a tough time to be an automaker. At the same time it is a tough time to be a dealer, too. Nobody is winning."

-Joy Wiltermuth -Victor Reklaitis -Claudia Assis

MW 'Liberation day' one year later: What Trump's tariffs are costing America

By Joy Wiltermuth, Victor Reklaitis and Claudia Assis

U.S. home builders and car manufacturers are taking a hit. Tariffs haven't slashed the federal debt as promised.

The U.S. debt grew in the wake of President Trump's "liberation day," even as the automobile industry took billions in tariff losses and residential construction fell.

One year ago Thursday, President Donald Trump panicked markets with his "liberation day" announcement, a road map to increased U.S. trade protectionism and, he said, to preventing foreign "cheaters" and "scavengers" from looting the American dream.

In February, Trump's economic agenda suffered a blow as the Supreme Court ruled he had exceeded his authority in using a 1977 law to justify most of his tariffs. The White House quickly replaced those invalidated tariffs using other, temporary means, surprising some who thought the court ruling might have offered the administration a hand with its affordability push.

At last check, U.S. consumers still faced a 13.7% effective tariff rate, down from 16% before the Supreme Court decision, according to the Budget Lab at Yale. The average U.S. tariff rate on all goods before 2025 was 2.6%.

While Trump touted tariffs as a way to shrink the U.S. debt, slash the trade deficit and bring back manufacturing jobs, that isn't how things have worked out. Instead, construction materials for a new home now cost builders thousands of dollars more, U.S. automakers have written off billions in tariff losses and the U.S. national debt has grown to more than $39 trillion.

With that backdrop, Trump's fellow Republicans, in control of both chambers of the U.S. Congress, head toward the midterm elections in November. Yet with gas at the pump near $4 a gallon nationally, affordability looks increasingly like a wedge issue in America. The White House did not respond to requests for comment.

Despite the Supreme Court's decision, Trump is still able to slap tariffs on other countries' products as they are imported, based on sector-specific issues like automobiles and other trade-related statutes.

MarketWatch took a look at three essential areas as liberation day turns one year old.

Anxiety over home construction

The U.S. needs to build more homes, but construction fell last year.

The U.S. faces skyrocketing housing costs and a housing shortage that could take a decade to resolve, according to J.P. Morgan estimates. The tumultuous tariff landscape of the past year hasn't helped.

Instead, it has made it extremely difficult to pinpoint an exact tariff cost for building materials, said Ed Brady, CEO of the Home Builders Institute. "When you talk with builders, it's thousands of dollars," Brady told MarketWatch. "The bigger challenge is that uncertainty has frozen a lot of things."

Indeed, single-family construction declined by about 7% in 2025, according to the National Association of Home Builders. The trade group also pegged residential building-material costs as 3% higher on a yearly basis in February.

Large-scale home builders tend to have more protection against price volatility in construction materials, while smaller firms, which can't buy at the same volumes and often don't have long-term contracts locked in with their suppliers, are more vulnerable, Brady said.

Affordability remains a crucial constraint, especially with 30-year mortgage rates back above 6.2% and the Iran war unleashing a historic global oil shock.

Builders already were having trouble pricing new homes because of uncertainty around building costs, but now they also face higher oil prices, according to the NAHB's chief economist, Robert Dietz.

"It's frustrating, but the uncertainty itself is a cost," Dietz said. "When people are deploying capital, figuring out how much land to acquire or how many building permits to pull, they need to know how much the cost is to build a home."

Yet the building industry ITB remains in "decent shape" in terms of margins after a number of pandemic-era boom years, according to Nishu Sood, principal of research at John Burns Research & Consulting. Margins had gone as high as 27% to 28% but now were trending closer to a more normal level of about 20%. "It's not at 15%," Sood said, "which would indicate financial pressure that's difficult to sustain."

U.S. debt grows

Tariffs are bringing in revenue, but the U.S. national debt keeps growing.

Trump and his allies often have said the benefits of tariffs include the revenue that the import taxes bring in, as that can reduce the federal government's budget deficits and the national debt. The White House in August highlighted an analysis by the nonpartisan Congressional Budget Office that projected that the increase in tariffs during 2025 - meaning from "liberation day" levies and other Trump-imposed duties - could reduce budget deficits by $4 trillion over a decade if they remained in place. And there's no question that tariff revenue has been growing, with the Treasury Department reporting that it totaled $195 billion in the government's 2025 fiscal year, up from just $77 billion in the prior year.

However, there haven't been great improvements in the annual budget deficit and the national debt. The deficit in the 2025 fiscal year was $1.78 trillion, down only slightly from the prior year's $1.82 trillion in red ink. The national debt, meanwhile, topped $39 trillion in March. "Surpassing $39 trillion in gross debt is an embarrassing milestone that both parties have helped build over decades," said one watchdog group, the Committee for a Responsible Federal Budget.

Servicing the U.S. debt already costs about $1 out of every $5 in collected tax revenue, according to estimates from Torsten Slok, chief economist at Apollo Global Management. In a decade, servicing costs are expected to require about $1 out of every $4, according to the CBO.

What's more, the Supreme Court's February ruling that struck down Trump's "liberation day" tariffs has sparked major doubts about the revenue that the levies had delivered. U.S. Customs and Border Protection has been working to figure out how to process the refunds to importers that now are expected. Companies including Costco Wholesale Corp. (COST) had sued the federal government asking for a refund if the tariffs were found to be unconstitutional.

The Trump administration has announced replacement tariffs that in large part make up for the duties that were deemed illegal because they relied on the International Emergency Economic Powers Act of 1977, but the new tariffs - which are based on Section 122 of the Trade Act of 1974 - are facing legal challenges of their own.

Eating the tariffs

Trump's tariffs on automobiles, auto parts and raw materials such as steel and aluminum hit U.S. automotive manufacturers at a particularly tricky stage. Not only are they facing stiff competition from China, changes to tax and emissions policies, and a tough transition to electric vehicles, but the U.S. consumer is also struggling to afford everyday needs, much less a new car.

And with gasoline prices now surging, consumers may be even more reluctant to make a purchase. So rather than pass the billions of dollars in tariff costs along to consumers, carmakers have chosen to absorb the blow. They are expected to largely hold the line on prices this year, too.

"They know that their customers are not going to stand for" price hikes, said Joseph Yoon, an analyst with Edmunds. "It becomes a question of losing market share for the automakers."

Basically, General Motors (GM) and Ford Motor (F), the two largest U.S.-based automobile manufacturers in terms of the number of vehicles sold, had to manage a total of more than $5 billion in tariff costs last year, without much relief expected this year.

GM said tariffs cost it $3.1 billion in 2025, and it estimates an additional cost of $3 billion to $4 billion in 2026.

Ford said its tariff impacts totaled $2 billion last year, and it is expecting another $2 billion in impact this year. As a company spokesperson explained in an email to MarketWatch, the 2026 tariff impact would have actually dropped to $1 billion, but a fire at one of its main U.S.-based aluminum suppliers forced it to source aluminum from overseas, which subjected it to $1 billion in aluminum-tariff costs.

Manufacturing data show the U.S. has continued to lose jobs in the past year.

But what's helping keep the car companies from raising prices, according to Erin Keating, an analyst at Cox Automotives, is that "the market is still very competitive, with makers chasing fewer buyers able to afford a new car."

Cox has estimated that U.S. automakers will sell an annualized 15.8 million vehicles this year, down from 16.3 million in 2025. This dynamic has been reflected in gross margins, or how much profit is derived from sales, for the companies. GM's margin fell to 6.9% in 2025 from 8% in 2024, while Ford's slid to 3.6% from 5.5%.

That doesn't mean prices for consumers haven't been creeping up. Destination and handling fees, for example, have climbed to $1,658 per vehicle this year, after rising to $1,551 in 2025 from $1,425 in 2024, Keating said. And car companies also have paused incentives and promotions.

In February, the average transaction price of a new car crept up 3.4% from a year earlier to $49,353, Keating said. That's the biggest year-over-year increase since the 9% jumps seen during the inflation-spike years between 2021 and 2023 but in line with typical price increases seen before the pandemic.

"A minority group of buyers is doing the majority of buying," said Edmunds's Yoon. Car dealers don't have it any easier, as nationwide discounts have dried up. "It's a tough time to be a car shopper, and it's a tough time to be an automaker. At the same time it is a tough time to be a dealer, too. Nobody is winning."

-Joy Wiltermuth -Victor Reklaitis -Claudia Assis

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