President Donald Trump’s wide-ranging tariffs could slam US households for an extra $3,800 this year as the new levies cause inflation to spike, according to a new report.
The president on Wednesday unveiled a reciprocal tariff plan including a 10% baseline tax on all imports and higher rates for certain trade partners – like a 54% total tax on China.
After incorporating these latest tariffs, the average effective US rate will soar to 22.5% – its highest level since 1909, according to Yale’s Budget Lab.
The reciprocal tariffs – when combined with taxes Trump has already enacted on steel, aluminum and auto parts – translate into a 2.3 percentage point increase to overall inflation this year, the research lab estimate, or about a $3,800 impact on the average household.
Inflation is currently at 2.8%, above the Federal Reserve’s target of 2.0, and the projected increase would bring the rate to its highest level since shortly after the COVID pandemic.
Economists have warned the hefty tariffs could reheat inflation, as producers pass along the added costs to consumers. Even companies that shift some production to the US will likely shell out more for labor, so their costs will go up, as well.
“If tariffs stay in effect as announced, foreign sellers will likely absorb some of the cost, as will American importers,” Bill Adams, chief economist at Comerica Bank, said in a note. “But even so, the increase will likely cause a 3% to 5% cumulative incremental increase in consumer prices above the trend rate of inflation over the next year.”
Brandon Daniels, chief executive at Exiger, an artificial intelligence supply chain firm, said the annual household cost increase will likely be lower due to mitigation strategies.
“Historical precedents indicate that sectors with more diversified and flexible manufacturing options – like appliances, furniture, textiles, and machinery – have responded to similar cost pressures by reshoring or expanding domestic production,” Daniels told The Post.
The 10% baseline tax is set to take effect after midnight on Saturday, but the higher tariffs – like a 20% levy on the 27-nation European Union, 24% on Japan and 17% on Israel – won’t take hold until April 9, giving nations some time to come to the negotiating table.
Mark Zandi, chief economist at Moody’s Analytics, said if there are no retaliatory tariffs from other countries, inflation will rise to 4.8% by the end of the year.
Trump’s latest tariffs will add at least $250 to the typical grocery bill for the year, Zandi added.
“For the lower income consumer who has no savings and is already paying for things with their credit card, that’s a lot,” he told The Post.
Robert Frick, the corporate economist for Navy Federal Credit Union, said: “My main concern is that lower income consumers are still under water from the high inflation we had from COVID.”
He said that food and transportation costs are particularly painful and have gone up well above the inflation rate.
A low income household spends about 30% of their income on transportation, he added.
Consumers will also likely see higher price tags on clothing and shoes, since Trump’s tariffs disproportionately affect apparel, according to Yale’s Budget Lab.
Major companies have been shifting their production away from China to other apparel manufacturing hubs like Vietnam, Cambodia and Thailand in an effort to escape harsh trade policy – but Trump’s reciprocal tariffs will slap those nations with taxes of 46%, 49% and 36%, respectively.
The research lab estimated apparel prices will soar 17% under the new taxes.
It’s not just everyday costs that will spike. Americans will likely face higher bills on larger purchases, particularly cars.
Trump’s 25% duty on foreign-made cars took effect Thursday. Starting May 3, the tax will also apply to imported auto parts, which will add to the cost of US-manufactured cars, as well.
The most impacted foreign-made cars could jump in price by as much as $20,000, according to a recent analysis by the Anderson Economic Group.
Even the least affected cars – those assembled in the US with a large amount of US parts – could cost an additional $2,500 to $5,000, according to the report.
Americans may feel more long-term pain from the tariffs in the form of job insecurity, too, according to Zandi.
“If history is a guide, other countries will respond with retaliatory tariffs,” Zandi told The Post. “Farmers can’t sell as much to China, machine tool manufacturers can’t sell as much to Mexico – all the things we export will come under tariffs by other countries, and that will hurt jobs in those industries here.”
If the tariffs break out into a full-fledged trade war, it could even lead to a recession, he said.
“It’s not just about what we pay for the things we buy. It’s about holding on to our jobs and our income,” Zandi told The Post.
On Thursday, China and the EU threatened to impose retaliatory tariffs.
