AILSA CHANG, HOST:
President Trump is calling for steep new tariffs on imported medicine. In a series of social media posts, the president also threatened to slap double-digit import taxes on home furnishings and heavy-duty trucks. Trump's tariffs have contributed to rising prices, but so far, that has not led people to cut back on spending. NPR's Scott Horsley joins us now with more. Hi, Scott.
SCOTT HORSLEY, BYLINE: Hi.
CHANG: OK, so tell us about these latest tariffs, which I think are supposed to take effect next week. Is that right?
HORSLEY: That's right. Trump says starting October 1, which is next Wednesday, he plans to impose a 25% tariff on heavy-duty trucks, a 50% tariff on kitchen cabinets and bathroom sinks and a 100% tariff on brand-name pharmaceuticals. Now, the White House has not offered a lot of detail beyond the president's social media post, but Trump hinted there could be some exceptions. For example, he says drug companies that are in the process of building new factories in the U.S. would be exempted from these tariffs, and it looks like generic drugs would also be exempted. So those are two pretty big carve-outs.
CHANG: OK. But some of Trump's tariffs have been challenged in court, right? So how does that affect these new levies?
HORSLEY: Trump has relied on a 1970s emergency law for a lot of his tariffs this year, and critics have gone to court saying that law doesn't actually give the president the authority to impose tariffs. So far, the courts have agreed with the critics, and the Supreme Court is set to hear arguments in a little over a month. But that challenge would not affect these tariffs because they're authorized under a different law, one that is designed to safeguard national security. Now some might question whether, you know, kitchen cabinets or bathroom vanities are actually vital to national security, but at least the security law does give the president explicit authority to impose tariffs.
CHANG: OK. Well, so far, what effects are tariffs having on, say, people's pocketbooks, on people's spending? Like, what are you seeing?
HORSLEY: Yeah, people are still spending money at a pretty good clip, at least in the aggregate. This morning, we learned that personal spending in August was up six-tenths of a percent, which was a bigger jump than forecasters expected. We also got some revised figures earlier in the week that showed spending during the springtime was stronger than first reported. That led to a pretty big upward revision in second quarter GDP. Now, the pace of spending would seem to be kind of at odds with a lot of survey data, which shows people are generally grumpy about the economy. But economist Shannon Grein says that hasn't caused them to lock up their wallets or tighten their purse strings.
SHANNON GREIN: I've been surprised more times than I care to admit just how resilient the U.S. consumer is. While there's still risks of, you know, an inflation pop here or some concern from tariffs, households are still spending and going to continue to try to spend until they're not able to.
HORSLEY: Grein notes that even though hiring has slowed down, the job market is still in pretty good shape, and so long as a lot of people are working and earning money, they're probably going to keep spending.
CHANG: But is there any sign that spending power is wearing thin at all?
HORSLEY: Yeah, spending increased faster last month than people's paychecks did, and obviously, there's a limit to how long that can go on. Some people drew down their savings in August or relied on plastic to keep up their pace of spending. Greg Daco, who's chief economist at EY-Parthenon, says that we're kind of in a two-speed economy right now, where a lot of the spending's being fueled by upper-income families, whose houses are worth a lot of money and whose stock portfolios are doing great. Meanwhile, lower-income households are just kind of scraping by, especially as tariffs drive up the cost of things they have to buy week after week.
GREG DACO: Whether you're thinking about food prices, apparel, autos or, now, potentially drugs, those are price increases that hurt families and disproportionately affect families at the lower end of the income spectrum.
HORSLEY: By contrast, tariffs have less effect on the price of things like travel and recreation, where a lot of well-off families are spending their money.
CHANG: That is NPR's Scott Horsley. Thank you so much, Scott.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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