President Donald Trump has plunged the United
States into a new phase of his trade war, and this time the economic casualties
will be clear, immediate and, for many Americans, painful. The new levies, combined with other tariffs already implemented this year,
will raise costs for the average American family by $3,800, according
to a new report by the Yale Budget Lab.
The tariff hit won’t fall evenly across American
households: The Budget Lab’s analysis shows the new policy is a textbook example of what’s known as a regressive
tax. That is, the tariffs will eat up a larger share of the earnings of lower-
and middle-income families than they will for wealthy households.
In the short run, households in the second-lowest
income decile — families earning roughly between $30,000 and $60,000, according
to the Census
Bureau — will lose about 4% of their disposable income due to Trump’s 2025
tariffs. Meanwhile, the richest households in the top quintile — those earning
$175,000 and above — will only lose 1.6% of their income, according to the
Budget Lab’s analysis.
The disparity is clear: The lower a household’s income, the more
burdensome these tariffs become. This is because lower-income families spend a
larger portion of their earnings on essential goods like food, clothing and
household items.
In absolute dollar terms, higher-income families
will incur larger losses — estimated at approximately $8,100 annually for the
top 10% of households, compared with $1,700 for those in the second-lowest
quintile. However, when calculated as percentage of household income, the
impact of these import taxes will fall disproportionately on lower-income
families.
Consumers should expect to see apparel prices to
rise by 17% due to Trump’s 2025 tariffs, while the prices of fresh produce will
rise 4% and motor-vehicle prices will go up by 8.4%, the equivalent of an
additional $4,000 for a new car.
These commodity-price increases underscore the
broader economic ramifications of the current tariff policies, highlighting the
potential strain on household budgets and consumer purchasing power in the
United States.
The new taxes, if kept in place, are expected to raise a large amount of
money for the U.S. Treasury at a time when budget deficits are at historic
peacetime highs.
They are forecast to bring in an estimated $3.1
trillion over the next decade before accounting for the impact on economic
growth. But because these new taxes are likely to slow down the economy, the
budget lab expects the true total to be about $2.5 trillion over 10 years.