Experts share thoughts on impact of tariffs on business operations, economy

Intent on sparking American business investments, creating jobs and boosting homegrown supply chain sources, President Donald Trump has long touted tariffs as a key source of government revenue. In a recent post on Truth Social, Trump explicitly said that the country would be “completely destroyed” without the “trillions of dollars” of tariff revenue flowing into the U.S.

According to the nonpartisan Congressional Budget Office (CBO), tariff revenue generated this past July totaled nearly $30 billion, a 242% increase over July of 2024. At this pace, in just four to five months, tariff revenue could equal last year’s entire total.

However, on Aug. 29, the U.S. Court of Appeals for the Federal Circuit, ruled seven to four that most of Trump’s tariffs were illegal under the emergency powers law. The decision keeps tariffs in place until mid-October, as the president takes his fight to the U.S. Supreme Court.

With a ruling still at hand, Idaho Business Review spoke with Zions Bank financial experts, Robert Spendlove and Karen Appelgren, about the role of tariffs and their impact on Idaho’s small businesses. Spendlove is a senior economist and public policy officer and Appelgren is a vice president and business advisor.

This interview has been edited for length.

Idaho Business Review: With inflation down and no recession, as projected by many, what is your reaction to the economy and the role of tariffs in the first half of the year?

Robert Spendlove: The real surprise is how the markets have reacted to a period of high uncertainty and risk. Markets have been surprisingly calm. After Liberation Day, we saw extreme volatility, even extreme fear. But the markets have become desensitized to the tariff movements, which has surprised many economists and a lot of people.

IBR: The economic theory is that a tariff is a tax and a tax increase means someone has to pay it. What has been the impact of tariffs for everyday consumers?

RS: Economists expected inflation to spike. Even Jerome Powell, chairman of the Federal Reserve, said he expected a meaningful amount of inflation to arrive within the coming months. The theory is that this increase would be passed along to the consumer. The surprise is we haven’t seen that yet. There is an economic impact of tariffs, but the question is who is bearing the cost. Does the importer eat it or push it to the retailer? Or do they push it to the consumer or up the supply chain to the manufacturer? That’s the part we don’t understand.

IBR: According to the Commerce Department, the GDP grew 3.3% between April and June, faster than expected. What does that figure truly indicate?

RS: Yes, that GDP growth is for the entire second quarter of the year. The prior quarter was 3%, and the forecast was 3.1% but it came in higher. By the way, 3% GDP growth is pretty good. Economists were expecting it to accelerate, and it did so much higher than we thought. What that second quarter says to me is that we are not seeing the negative economic impact many were expecting. The U.S. economy is showing it is quite resilient to this kind of uncertainty.

IBR: How do such factors affect the state’s small business sector?

Karen Appelgren: We are still seeing small businesses that are growing and doing well and prospering. But tariffs have impacted some industries, particularly those that import goods. Companies that need to look outside of Idaho for supplies are the ones feeling some challenges. Some are looking for alternate suppliers domestically and abroad, but tariffs are more widespread with many countries than what we have seen previously.

IBR: Would you say that some companies are better suited to deal with this upheaval than others might be?

KA: Yes, some small businesses with lines of credit and access to financing are better positioned to get quantity discounts and buy in bulk. So, we’re certainly seeing a lot of interest in lending, particularly in terms of lines of credit.

IBR: Regarding the president’s plan to boost the economy and supply chain sources, what has been happening in Idaho?

KA: In terms of impact, there have been some challenges. One client wanted to bring manufacturing to Idaho, but the equipment they need can only be sourced from overseas suppliers. I also serve on the advisory board of the Idaho Manufacturing Alliance and in such a case, the Alliance serves as a great resource to help find providers. Other clients are being extremely cautious managing costs because some customers may be unable to absorb price increases. That’s a decision a company needs to make.

IBR: What are some other ways in which companies are dealing with or managing tariffs and supply chain problems?

KA: As mentioned, buying in bulk is where the access to capital is most helpful. Plus, some have considered vertical integration, bringing parts of their supply chain in-house to help reduce costs or improve control. One client who bought from China was looking at both Vietnam and India to help source her products. But as more tariffs rolled out, these countries were also impacted. It’s an ongoing conversation for many businesses.

IBR: With the fluctuation in tariffs and the increase in the GDP, how would you characterize the small business market in Idaho?

KA: Idaho’s small businesses are resilient, which allows them to pivot more quickly than most larger companies. I think we have a strong state economy, and there is a lot of demand for Idaho goods and services. I am bullish on the small business landscape in Idaho. Businesses here are scrappy and will meet the challenges that come their way.

IBR: When it comes to tariff revenue, numerous figures are reported. How significant is the tariff revenue that has been generated thus far?

RS: The numbers that I have seen indicate the tariffs could produce between $300 and $400 billion per year. Think about that over a 10-year period. The cost of the Big Beautiful Bill was about $4 trillion. If they keep the tariffs in place and continue to generate this kind of revenue, the tariffs alone will pay for this bill.

IBR: Recently, Powell “grudgingly” admitted that tariffs don’t fuel inflation. Considering the strife that has existed between him and the president, how big a statement is this?

RS: It was big and that is why you saw such a huge jump in the markets. The Fed says it’s not political, but they’re influenced by politics. The president has been leaning on the Fed since he’s been in office. It’s nothing new. Trump just does it more publicly and aggressively. The Fed has dug in its heels when it comes to dropping interest rates. But Powell has pivoted, saying the Fed will also start caring more about employment rather than just inflation. They didn’t commit to a path, but they essentially sent the message they will begin to start dropping interest rates again. The markets are reacting to that pivot.

IBR: Economic forecasting is a subjective field, meaning not everyone always agrees. How fair is such a characterization?

RS: Well, Powell did say economic forecasters need to have more humility. We don’t always get it right. In fact, we do get it wrong. To say that we know and fully understand the economy, and to say that our forecasts are golden sends the wrong message. I agree with him saying there are times we need more humility and to admit that we don’t understand. Inflation is one of those times. Pre-pandemic, we had a period when inflation was trending down for 20 years with essentially no inflation. But going into the pandemic, the Fed had a stated policy to encourage higher inflation. It sounds crazy now just thinking about it. That policy led to the inflationary surge we saw in 2021-22.