- Economists are waiting to see how damaging Trump’s tariff agenda may be, with inflation impacts so far limited—but Senator Elizabeth Warren warns the real cost is long-term, as global partners begin to see the U.S. as an unreliable trade ally. While the White House touts tariffs as a win for American voters, Sen. Warren told Fortune they’ve driven up costs, delayed manufacturing investment, and forced the Fed to keep interest rates higher than it otherwise would.
Economists are split on how damaging President Trump’s tariff agenda may turn out to be. Some are worried it will boost inflation, while others argue a universal 10% hike to imports introduced months ago have barely blipped in inflation data.
Indeed, markets have now generally begun to look through the tariff back and forth, and are less concerned by the ultimate fallout than earlier in the Trump 2.0 administration. Goldman Sachs, for example, wrote this week that even a 15% universal tariff rate would result in only a 1.3pp increase to the effective tariff rate overall.
Jerome Powell and the Federal Open Market Committee have been criticized by Trump for not cutting the base rate because of their concerns about tariffs. Critics argue that June inflation data, for example, only showed a 0.3% increase compared to the month prior, bringing the 12-month unadjusted rate to 2.7%.
But on top of that, concern from some spectators is the longterm damage the president’s see-sawing agenda is doing to the perception of the world’s largest economy.
Trade partners reacted to Trump’s “Liberation Day” tariffs with promises to negotiate, but also disbelief. Since April, these partners have also been subject to changing deadlines and shifting sands on the rate of the economic sanctions they may face if they don’t pen a deal with the White House.
The lasting damage of the Trump presidency on these relationships is a concern for Democrat Senator Elizabeth Warren (Massachussetts). She told Fortune in an exclusive interview: “Donald Trump has done enormous damage to America’s partnerships around the world.”
“The impact of six months of Donald Trump will be felt for two generations, as more nations blink hard at what’s happening in the U.S. and conclude that we are simply not a reliable trading partner. That hurts us now and it will hurt our children and our grandchildren.”
The White House argued tariff action is for the benefit of voters. Spokesman Kush Desai told Fortune: “No one has suffered more from America’s lopsided ‘free’ trade arrangements and foreign countries’ unfair trade practices than the working class Americans who Elizabeth Warren has always pretended to be a champion for.”
“President Trump’s tariffs have already delivered trillions in historic investment commitments that will create tens of thousands of quality jobs, along with new trade deals with the U.K., Vietnam, Indonesia, and more countries to come that level the playing field and create billions in new export opportunities.”
Desai finished that Warren “talks” but Trump “delivers.”
The data question
Despite the continued pressure from Trump and his administration on the Fed to lower the base rate, chairman Jerome Powell has confirmed that if it weren’t for the Oval Office’s policies themselves, the base rate would already be lower.
This is one of three costs Sen. Warren says is already trickling through the economy because of White House policy, explaining: “Families across America have been paying more on credit cards and car loans and other forms of consumer debt because Donald Trump has played a game of on, off, on, off, on, off, on tariffs.”
The other costs, she continued, is that investment particularly in sectors like manufacturing has declined.
She said: “No one wants to build a new factory, buy a lot of expensive equipment or train a workforce if they don’t have a sense of what their imports will cost and what their exports may get tagged with in the tariff world.”
Indeed, data from the St Louis Fed shows private fixed investment in the manufacturing sector was down 5.2% in Q1 2025 compared with the quarter prior.
That said, gross private investment in Q1—spending by individuals and businesses on production processes et al—did tick up in the first quarter, with fixed investments up 7.6pp according to the Bureau of Economic Analysis. The Trump administration has also scored some headline wins on business investment, with Apple announcing $500 billion in domestic investment and the Stargate AI project which will reportedly to generate a further $500 billion investment in infrastructure over the next four years.
Sen. Warren also highlighted prices are starting to inch up in commodities which are heavily imported. The most recent producer price index (PPI), for example, showed upticks in computer electronics and furniture at a wholesale level (up YoY 2.6% and 3.4% respectively)—data which the Federal Open Market Committee will be well aware of when making their decisions about the base rate.
“Under the headline number in areas that are more tariff-vulnerable … inflation has gone up faster and in areas where the United States … can’t produce a good substitute at home,” Sen. Warren added, adding this may be the reason areas like groceries shot up 3% in the most recent CPI data.
