This new analysis, authored by the Institute on Taxation and Economic Policy, underscores that President Donald Trump’s tariffs—largely enacted in his second term—will disproportionately burden America’s poorest households. The costliest 20 percent of households will experience a much less drastic effect. As our joint findings illustrate, the short-term increased tax burdens from these retaliatory tariffs will uniquely fall on the bottom 20% of income earners. In comparison, the richest 1% will experience the least pressure.
That analysis shows a painful contrast of tax impacts. Top decile will end up with a tax increase of 1.7% of their income and the bottom two quintiles will see a shocking increase almost four times as much. This especially dramatic example illuminates the regressive nature of tariffs. The majority of U.S. trading partners enjoy an effective tax rate of 10% or lower on their imports. Mexico and Canada face even tougher battles with high 25% tariff spikes on targeted improducts. Simultaneously, thousands of China-made products are hit with impossible import duties—some as high as a shocking 145%.
Specific products including aluminum, steel, and cars have a 25% tariff. Economists have expressed concern that consumers will inevitably shoulder some of these costs, leading to higher prices for everyday goods. Ernie Tedeschi, director of economics at the Yale Budget Lab, stated that “lower income consumers are going to get pinched more by tariffs,” reinforcing the notion that tariffs ultimately serve as a tax burden on American families.
This short-term tax burden disproportionately affects those in the lowest income bracket. They do this while carrying a burden that is more than 2.5 times as heavy as those who earn more. As retailers start changing their pricing strategies due to these tariffs, American consumers will have to be the ones bearing the cost by making exorbitantly expensive changes. Increasing trade tensions have accelerated this tectonic shift in the economic landscape. Consumers are becoming more worried about a potential recession, which is weighing on their level of spending.
Researchers at the Heritage Foundation underscore a crucial aspect to this story. They contend that “tariffs are nothing more than taxes on Americans by another name.” They further suggested that cutting tariffs could represent “the biggest tax cut low-income families will ever see.” These findings highlight the importance of policymakers to understand the impact of tariff policies on at-risk communities before implementing policies that disproportionately harm them.
While the debate over tariff policies carries on, Scott Bessent commented that the best thing we can do now is get to work on tax reductions for all Americans. He stated, “We’re working on the tax bill and for working Americans, I believe that the reduction in taxes is going to be substantially more.” His comments speak to a larger emerging movement within the economics community that reducing tariffs can bring significant relief to low-income families.
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