Trump tariffs hit low-income households hardest

[UNITED STATES] Tariffs imposed by President Donald Trump during his second term would disproportionately affect the poorest U.S. households more than the wealthiest in the short term, a new analysis reveals.

Tariffs are essentially taxes that importers pay on foreign goods, with economists anticipating that consumers will bear at least part of this cost through higher prices, depending on how businesses adjust their pricing strategies.

The debate over tariffs has grown more intense in recent months, as economists and policymakers weigh the long-term economic impacts against short-term political motivations. Supporters argue that tariffs protect domestic industries and jobs, while critics claim they place an undue burden on consumers and disrupt global supply chains. This debate is particularly urgent as inflation continues to challenge American households.

By 2026, the poorest 20% of households are projected to experience a tax increase nearly four times greater than that of the wealthiest 1%, assuming current tariff policies remain in place, according to an analysis released Wednesday by the Institute on Taxation and Economic Policy (ITEP).

For the bottom 20% of households, which are expected to have incomes below $29,000 in 2026, tariffs would result in a tax hike equivalent to 6.2% of their income, on average, ITEP’s analysis found. In contrast, the top 1%—those earning more than $915,000 annually—would see a tax increase of only 1.7% of their income, on average.

This disparity reflects broader trends in economic inequality, where lower-income families allocate a larger portion of their income to essential goods, many of which are imported. A 2025 report by the Congressional Research Service pointed out that tariffs on everyday products such as clothing, electronics, and household items effectively act as a consumption tax, which places a greater strain on those with limited disposable income.

Economists often assess the financial impact of policies relative to household income to understand how they affect disposable income and overall quality of life. "Tariffs are just taxes on Americans by another name," researchers at the Heritage Foundation, a conservative think tank, wrote in 2017 during Trump’s first term. “They raise the price of food and clothing, which make up a larger share of a low-income household’s budget,” they added, suggesting that reducing tariffs could serve as a significant tax cut for low-income families.

Already, some retailers are raising prices in response to tariffs. Major retailers like Walmart and Target have warned investors that sustained tariffs could lead to higher prices, particularly on electronics and home goods. Analysts predict that while some companies may temporarily absorb the additional costs to remain competitive, extended tariffs will likely trigger price hikes across the board, further stretching household budgets.

A recent analysis by the Yale Budget Lab also concluded that Trump’s tariffs represent a "regressive" policy, meaning they disproportionately affect lower-income households. The study found that the short-term tax burden for the poorest consumers is roughly 2.5 times greater than for wealthier individuals.

“Lower-income consumers are going to get pinched more by tariffs,” said Ernie Tedeschi, director of economics at the Yale Budget Lab and former chief economist at the White House Council of Economic Advisers under the Biden administration.

Some trade experts argue that the long-term consequences of tariffs could extend beyond consumer prices, potentially hindering economic growth by reducing trade volumes and deterring foreign investment. A 2026 study by the Peterson Institute for International Economics projected that sustained high tariffs could reduce U.S. GDP by up to 0.5% over the next decade, with the greatest impact on sectors dependent on imported materials.

Treasury Secretary Scott Bessent has suggested that tariffs could lead to a "one-time price adjustment" for consumers. However, he also emphasized that trade policy is part of a broader White House economic strategy, which includes an upcoming tax-cut package aimed at benefiting working Americans. “We’re also working on the tax bill, and for working Americans, I believe the reduction in taxes is going to be substantially more,” Bessent stated on April 2.

It remains unclear how current tariff policies may evolve. The White House has indicated that it is considering trade agreements with certain countries and potential exemptions for specific products.

Since taking office, Trump has imposed a 10% tariff on imports from most U.S. trading partners. Mexico and Canada face 25% levies on certain goods, while many Chinese products are subject to import duties as high as 145%. Additionally, specific products, such as aluminum, steel, and automobiles, face a 25% tariff.