As the world edges further into what some have called a new era of economic protectionism, the effects of tariffs are radiating far beyond the negotiating tables in Washington and Ottawa. Recent data and real-world examples from both sides of the border reveal a story that’s more complicated—and more consequential—than headline numbers might suggest. From Wall Street’s conflicting signals to the quiet struggles of a rural Canadian municipality, tariffs are reshaping budgets, consumer prices, and even the choices local governments make about snowplows and sports fields.
In the United States, the debate over who really pays for tariffs remains unsettled. According to recent reporting by CNBC, economic data as of August 17, 2025, continue to offer mixed signals about the true impact of tariffs on American prices. The Consumer Price Index (CPI) has ticked upward, though it’s consistently come in below experts’ forecasts. Meanwhile, producer prices have recently surprised to the upside, suggesting that at least some of the costs are being felt further up the supply chain.
JPMorgan economists, led by Michael Feroli, have pointed out that the pass-through effect of tariffs on consumer prices has been “less bad than expected so far.” One explanation, they say, is that companies are absorbing much of the tariff burden by accepting lower profit margins. With profit margins still wide by historical standards, many firms have been able to shoulder these added costs without slashing capital or operating budgets—at least for now.
But how long can that last? As the Barclays report cited by CNBC notes, the weighted-average tariff levy in May 2025 was just 9%, lower than the bank’s estimate of 12%. This is partly because U.S. demand has shifted away from countries with higher tariffs, and more than half of U.S. imports that month were duty-free. Even higher rates on Canadian goods didn’t apply to items covered under the U.S.-Mexico-Canada trade agreement. “The real surprise in the U.S. economy’s resilience lies not in its reaction to tariffs but that the rise in the effective tariff rate has been more modest than commonly thought,” Barclays analysts wrote. Still, the bank predicts the weighted-average rate will eventually settle at around 15% as more products, including pharmaceuticals, are targeted and as loopholes close.
For consumers, the future looks uncertain. Citi Research, as reported by CNBC, doesn’t foresee broad-based price hikes from tariffs just yet. The firm attributes recent jumps in service prices to one-off anomalies, such as a 5.8% surge in portfolio management fees linked to the rally in asset prices. “Softer demand means firms will have difficulty passing tariff costs on to consumers,” said Andrew Hollenhorst, Citi’s chief U.S. economist. “While some firms might still attempt to slowly increase prices in coming months, the experience so far suggests these increases will be modest in size. This should reduce concerns about upside risk to inflation and increase concerns that decreased profit margins will cause firms to pullback on hiring.”
Goldman Sachs, however, offers a starkly different projection. According to their analysis, by October 2025, American consumers could be shouldering as much as 67% of tariff costs, up from just 22% in June. Meanwhile, the burden on businesses is expected to shrink from 64% to just 8%, and foreign suppliers’ share of the impact will rise from 14% to 25%. This shift could mean higher prices at the checkout counter for ordinary Americans in the months ahead.
All of this has left the Federal Reserve in a tricky spot. Tariffs have kept inflation stubbornly above the Fed’s 2% target, prompting policymakers to hold off on interest rate cuts. But softening jobs data have raised alarms about employment, fueling calls for monetary easing. “The evidence so far is that almost all of the costs of tariffs are being born by domestic firms,” Hollenhorst wrote. “The lack of pass-through should reduce lingering Fed official inflation concerns and allow for a series of rate cuts beginning in September. If anything, markets are underpricing the potential for faster and/or deeper cuts.”
While economists and central bankers wrangle over the macro effects, the consequences of tariffs are hitting home in ways that are anything but abstract. In Central Elgin, a rural municipality just outside London, Ontario, the impact of tariffs landed with the purchase of a single snowplow. As reported by The London Free Press, the municipality had budgeted $370,000 in 2025 to replace an aging plow truck, expecting delivery in July 2026. But due to “continuous changes in trade agreements and tariffs,” the cost of the tandem-axle snowplow jumped by $74,500—an increase of nearly 25%.
Central Elgin Mayor Andrew Sloan described the price hike as a clear demonstration of how global trade policies can have direct, tangible effects on local budgets. “I think it’s underreported, because I didn’t think about (tariffs) as much,” Sloan said before a recent council meeting. “Sure, we’re not buying hundreds of $380,000 trucks, but to serve the residents of Central Elgin, I need to have hardware. And the cost of . . . that is all of a sudden, in this case, 25 per cent more.”
The truck’s body is built in Canada, but it requires American and Mexican components—now subject to 25% tariffs. The snowplow itself is made in Mexico but needs parts from Canada and the U.S., illustrating just how interconnected North American manufacturing has become.
For Central Elgin, which operates on a $17 million budget, every $170,000 in extra costs translates to a 1% property tax hike. Sloan acknowledged that the municipality’s finances are currently buoyed by a $15 million settlement related to the annexation of land for Volkswagen’s $7 billion electric vehicle battery plant in nearby St. Thomas. But, as Sloan put it, “Costs for all these things are a lot higher when you have a truck (price increase by $75,000. . . . The money’s) got to come from somewhere.”
The council ultimately voted 4-3 to proceed with the purchase, after debating whether to delay or seek alternatives. The choices facing Central Elgin are mirrored in towns and cities across Canada. Andreas Schotter, an international business professor at Western University’s Ivey business school, told The London Free Press that tariffs are “not just an abstract trade dispute,” but a direct hit to municipal governments’ bottom lines. “The real danger for rural municipalities is the compounding effect: higher costs for goods and services they need to buy, paired with slower revenue growth from a stressed local economy,” Schotter explained. “That means councils either have to cut back on what they buy, postpone planned upgrades, or find more revenue—often through higher local taxes or fees.”
Other local governments are watching the situation closely. Woodstock, a city of about 50,000 in Ontario, hasn’t yet felt the bite of tariffs, according to chief administrator David Creery. But with big-ticket items like artificial turf for sports complexes—products largely supplied from the U.S.—on the horizon, the city is exploring alternatives where possible. “We’ll do what we can to try and avoid (tariffs) as much as possible,” Creery said.
Whether in the boardrooms of multinational banks or the council chambers of small Canadian towns, the story of tariffs in 2025 is one of uncertainty, adaptation, and tough choices. The numbers may be mixed, but the reality for many is all too clear: the costs of global trade disputes are being felt close to home, often in ways that only become apparent when the next snowplow—or the next rate hike—comes due.
