Tariffs announced by President Donald Trump last week have people across the world scrambling to prepare for their economic impact, including regular American families. So, how are these moves expected to impact your wallets?
Estimates from the Tax Foundation indicate that the tariffs on Canada, China and Mexico that Trump proposed to go into effect Tuesday would have reduced economic output by 0.4% and increased taxes by more than $800 for the average American household this year. The Peterson Institute for International Economics estimated that it could cost Americans even more – $1,200 a year for the average household.
Axios reported that “economists almost universally agree that the tariffs imposed by President Trump will cost the average American household hundreds, if not thousands, of dollars every year in higher goods costs.”
Trump’s proposals included 25% tariffs on most goods from Canada and Mexico as well as a 10% tariff for goods from China. By Wednesday, the Canadian and Mexican tariffs had both been paused as the countries agreed to meet with the Trump administration at the bargaining table. However, the 10% tariff on Chinese imports did go into effect.
In response, China planned to retaliate by imposing additional tariffs on certain U.S. imports starting next week, Forbes reported. Beginning next Monday, the country is expected to impose an additional 15% tariff on coal and natural gas imported from the U.S. Additional 10% tariffs on crude oil, agricultural machinery, large cars, and pickup trucks are also expected, per a Chinese Ministry of Finance notice.
That notice claimed the U.S.’s “unilateral imposition of tariffs seriously violates the World Trade Organization’s rules.”
According to the Peterson Institute, “careful analysis of the 2018–19 trade war with China [during Trump’s first term] consistently found that foreign exporters to the United States did not lower prices when hit with U.S. tariffs,” instead, U.S. taxpayers ended up shouldering the burden. The Tax Foundation noted that the previous Trump administration imposed “$80 billion worth of new taxes on Americans by levying tariffs on thousands of products valued at approximately $380 billion in 2018 and 2019,” calling it “one of the largest tax increases in decades.”
Even before Trump took office, WalletHub found in a December survey that 74% of Americans thought that upcoming tariffs could increase inflation.
CBS News business analyst Jill Schlesinger explained to Audacy that, once companies here have to pay tariffs, they decide whether to absorb those costs or pass them on to consumers, making goods more expensive.
“If we see these trade conflicts escalate into a full-blown trade war globally, could we see inflation pop on up to 3.5% or maybe even 4%? Yes,” she said. After peaking at 9% in 2022 following the COVID-19 pandemic, inflation is now down to around 2.9%.
Even with pauses in the Mexican and Canadian tariffs, people are preparing for increased costs. Forbes reported that Trump’s son-in-law, Jared Kushner, is pausing an investment into one of Mexico’s leading infrastructure companies, for example. It also reported that European Commission President Ursula von der Leyen addressed the looming threat of Trump placing tariffs there in a speech this week.
“We should be worried about the fact that they can increase the costs for everyone inside the United States,” Rodrigo Adao, associate professor of economics at University of Chicago Booth School of Business, told Audacy. “I think that’s a likely scenario. I think because it comes from both the uncertainty and just the threats keep going and the fact that it's being used repeatedly for many different purposes.”
In Detroit, Mich., Jeff Gilbert, CBS News automotive reporter, said that we can understand how this uncertainty is manifesting by taking a look at Ford.
“The F-150 pickup, which is made in Dearborn, Michigan, uses an engine that’s made in Windsor, Ontario,” he explained to Rob Hart of the Noon Business Hour. “But that engine uses parts that come back over the border, in many cases from the United States or even Mexico. So, you can start to see how elaborate and how difficult this is.”
As for the extra costs that might get passed down to Americans, Axios said its not clear if households can handle it after dealing with years of high inflation.