Economic Uncertainty Looms: Trump’s Tariff Plan Sparks Concern
A Threat to Consumer Wallets
The recent presidential election highlighted Americans’ economic anxieties, with nearly half of voters feeling financially worse off than four years ago. However, President-elect Trump’s proposed tariffs on imported goods may exacerbate the very inflation he criticized during the campaign.
Tariffs: A Tax on Consumers
Economists warn that Trump’s tariffs would raise prices for American consumers, disproportionately affecting lower-income households. The typical U.S. household could pay an additional $3,000 per year on goods like clothing, furniture, and appliances. “It’s bad for consumers,” says Mark Zandi, chief economist at Moody’s. “It’s a tax on consumers in the form of higher prices for imported goods.”
Job Loss and Slower Growth
The proposed tariffs would also lead to job loss and slower economic growth, according to economists. The Trump campaign’s plan could reduce average after-tax incomes by almost 3% and cut U.S. employment by 684,000 full-time jobs.
A Protectionist Policy
Tariffs have been used for centuries, but their importance as a source of government revenue has declined. Today, they are largely used as a protectionist policy to shield certain industries from foreign competition. Trump’s proposals are much broader than those imposed during his first term, with plans for a 10% or 20% universal tariff on all imports and a tariff of at least 60% on Chinese goods.
Consequences of Tariffs
A 20% worldwide tariff and a 60% levy on Chinese goods would raise costs by $3,000 in 2025 for the average U.S. household, according to the Tax Policy Center. American consumers would lose $46 billion to $78 billion a year in spending power on goods like apparel, toys, and household appliances.
Tariff Revenue: A Double-Edged Sword
While Trump’s plan could generate $4.5 trillion in net new revenue for the federal government over 10 years, the typical U.S. household would still lose $2,600 a year, even after accounting for potential tax cuts. The U.S. economy would also likely suffer due to tariff “cross currents,” including job loss and lower consumer demand.
Economic Forecast
Capital Economics expects the Trump administration to introduce tariffs in the second quarter of next year, which would cut Gross Domestic Product growth by about 1% from the second half of 2025 through the first half of 2026 and add 1 percentage point to inflation. As the economy navigates these uncertain times, one thing is clear: Trump’s tariff plan poses a significant threat to American consumers and the overall economy.
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