Trump’s new tariffs on China, with potential duties on Mexico and Canada, could cost typical households $1,200 annually, with lower-income Americans facing disproportionate impact.
According to Peterson Institute analysis, while typical households face $1,200 in annual costs, the bottom 20% of earners would lose 2.7% of their income, more than four times the 0.6% impact on the top 1%.
This disparity stems from lower-income families spending more of their income on essential goods directly affected by tariffs. The timing is particularly challenging as consumer financial health shows signs of stress, with credit card minimum payments reaching record highs at 11% of active accounts.
Tariffs could also increase inflation, delaying Federal Reserve rate cuts, keeping borrowing costs elevated. Additionally, retaliatory measures from China could affect manufacturing and agricultural jobs, particularly in states that supported Trump’s 2024 election victory. The situation is especially concerning given that low-income households are already grappling with high living costs, depleted savings, and increased debt burdens.