August Market Insights: The End of Tariff Risk?
While markets celebrate the immediate relief from worst-case scenarios, the economic reality tells a more complex story — one where the real impact is just beginning to unfold.
As families gear up for back-to-school season and we head into the final stretch of summer, July's market performance delivered what looked like a collective sigh of relief from investors.
The S&P 500 climbed 2.2% while the Nasdaq gained 3.7%, seemingly shrugging off months of trade tension anxiety. The 90-day tariff pause ended in July in a flurry of trade announcements. Deals with the European Union (EU), Japan, and South Korea resulted in 15% tariffs, while Indonesia and Vietnam came in around 20%. Even talks with China seem to be progressing ahead of its own August 12 deadline.
Given the market's positive reaction to these announcements, is it safe to say that tariff risk has mostly passed? The answer lies in understanding what is already happening beneath the surface of these trade announcements. While markets celebrate the immediate relief from worst-case scenarios, the economic reality tells a more complex story — one where the real impact is just beginning to unfold.
Corporations playing defense
Here's what's fascinating about the current moment: Corporate America has been playing defense, absorbing most of the additional $55 billion in tariff costs in 2025 rather than immediately hitting consumers with higher prices. It's a strategic gamble that reveals just how much companies value market share in today's competitive landscape.
Take General Motors, which reported a staggering $1.1 billion quarterly hit from tariffs but chose to eat those costs rather than risk losing customers to price increases. It’s a calculated business strategy, but this approach is proving financially unsustainable.
Economists are noting the shift, observing that “with little relief on import prices, domestic firms are stomaching the cost of higher tariffs and starting to pass it on to consumers.”
Uneven consequences
Even the better-than-feared tariff levels are striking in a historical context — the US effective tariff rate has surged from roughly 2.4% at the start of 2025 to 16-20%, levels we haven't seen since the 1930s.
Worth noting, the impact is not spread evenly across the economy, which is why overall inflation measures haven't exploded. Instead, we're seeing concentrated pain points that tell a more nuanced story. Clothing and textiles are bearing the brunt, with shoe prices jumping 40% and apparel costs rising 38% in the short term. Steel and aluminum tariffs doubled from 25% to 50%, driving steel prices up 16% since the current administration took office.
This concentration effect creates an interesting dynamic … certain sectors and consumers are experiencing significant cost pressures while broader economic measures remain relatively stable.
Economic impact
J.P. Morgan’s analysis suggests current tariffs could add 0.4% to the overall price level, providing solid justification for the Federal Reserve's cautious approach to monetary policy — and while this is widely assumed to be a one time price adjustment, it’s still expected to have an impact on consumers. Yale's Budget Lab puts this in stark household terms where consumers now face an average effective tariff rate of 18.4%, equivalent to a $2,400 per household income loss hurting lower income households the most.
Longer-term growth projections also paint a sobering picture. Current tariffs are projected to shave 0.5% off US GDP growth in 2025, with the economy remaining persistently 0.4% smaller in the long run. That's $115 billion annually in lost economic output.
Investment implications
The market's July rally reflects relief that we've avoided the most extreme tariff scenarios, but the fundamental investment landscape has shifted in important ways. While immediate panic has been averted, the economic undercurrents point to sustained pressure on growth trajectories, corporate earnings, and consumer purchasing power.
We're not experiencing the end of tariff risk, but rather a new phase where the uncertainty around tariff levels shifts focus to the aftermath impacts on inflation and growth. Understanding these dynamics, rather than just celebrating diplomatic victories, will be crucial for navigating the months ahead.
Take the next step toward a more confident financial future with Ellevest. Schedule a complimentary consultation with one of our financial experts to explore how we can help you build a personalized plan that aligns with your goals and values — starting today.
About Ellevest
Founded in 2014 with a mission to get more money in the hands of women, Ellevest offers wealth management and financial planning services optimized for women.
