The ripple effect of the new wave of President Donald Trump’s sweeping tariffs announced this week will be most felt by low-income Americans, who rely heavily on products from countries that are most challenging with Trump’s tariffs, and who have fewer disposable incomes to absorb higher prices, NBC News reported.
Trump has put some of his best tariffs on goods coming from countries that make low-cost products on discount retailers shelves. For example, products from Vietnam, Sri Lanka and Cambodia have more than 40% tariffs. This means that importers now have to pay 40% of the value of those goods into the country to customs and border protection at ports of entry to ensure that they are in place. Products from China will have additional tariffs of over 70% in total.
According to economists and business executives, Trump has pledged to lower prices for struggling Americans, but his tariffs are expected to increase costs, from children’s shoes to fresh produce. The impact of tariffs released since Trump took office could cost an average household $3,800 a year, according to an analysis by Yale University’s Budget Institute.
For households with the lowest income, they are estimated to have a 4% reduction in their after-tax income from tariffs, and the report is estimated to be three times greater than the impact on high-income households. This is because those consumers spend a lot of their income on essentials such as food, clothing, and transportation, and are more likely to buy products imported from countries with the most tariffs.
“The White House Economic Advisors Council Chief Economist during the Biden administration,” said Ernie Tedesci, director of economics at the Budget Institute, who served as the Chief Economist for the White House Economic Advisors Council. “Taxes are essentially sales tax, tax on expenditures, and low-income families are exposed to tariffs because they have a higher percentage of their income than high-income families.”
As he took office, Trump’s tariffs could raise prices by 2.3% overall, adding to the roughly 3% inflation the US is already experiencing, according to an analysis by the Budget Lab. Estimates show that in the areas that are hit hardest, the prices of leather products, including shoes, will rise by 18%, while apparel (17%) and electrical equipment (10%) will rise. Also, consumers can surpass grocery bills, with rice prices expected to rise by 10% and fish, nuts and fresh produce prices rising by 4%.
Trump and White House officials have downplayed the impact of these price increases, saying they argued that it was necessary to restructure global trade to reclaim manufacturing jobs to US Treasury Secretary Scott Becent, who had millions of people working on Wall Street.
“The American Dream isn’t, ‘Let them eat a flat screen,'” Bescent said last month on NBC News’ “Meet the Press.”
After the stock market plunged Thursday towards its biggest day-long loss since 2020, President Donald Trump defended his vast tariff policy by predicting a massive economic “boom.”
“American dreams aren’t conditioned on the cheap boring things they’ve got from China,” he said. “It’s more than that, and we’re focusing on affordability, but it’s a mortgage, it’s a car, it’s a real wage boost.”
However, Americans have proven sensitive to price increases in recent years after voter backlash in the 2024 election torn apart. According to Exit Polling, four in 10 voters said the economy is the best issue than any other topic surveyed.
“As a former Biden administration official, don’t underestimate the way food inflation can anger people,” Tedesci said.
Like inflation, this effect is felt most keenly by households with the lowest incomes. These households not only rely more on low-cost items imported from countries such as Vietnam and China, but also may have fewer budget breathing chambers to absorb higher costs.
“At the bottom edge, you need all the dollars for what they do, whether it’s food, bus rides, shelters,” said Kimberly Crowsing, a senior non-resident fellow at the Peterson Institute for International Economics. “If your household income is $100,000 and your tariffs are $2,000, you feel bad about it. It’s 2% of your income. But your income is $20,000 and the tariff costs are $800.
These low-income households say Wall Street banks and business executives are more likely as a result of tariffs. They warn that high companies’ costs could suspend or pull back investments in new locations, factories, etc., while lower consumer spending could reduce job offers.
“Those with a higher income distribution can survive these storms without getting hungry or being kicked out, but many Americans live far more economically unstable lives,” said flausing. “So one of the big ironies of this policy is that Trump’s populism was meant to speak to those who were really left behind, and that it fundamentally makes their lives much worse.”
Tariff frontline retailers say they are preparing to raise prices while anticipating a drop in demand from shoppers. On Thursday, following Trump’s announcement, retailer’s stocks fell over with discount retailers and Wayfair stocks that cut low-cost furniture by more than 20%.
“The early signs are that these tariffs will be very serious for retail,” said Blake Harden, vice president of international trade with the Association of Retail Industry Leaders.
For example, according to Lila, the tariff rate for baby shirts made in Vietnam is more than doubled to 78%. Retailers also expect consumers to reduce their spending overall, Harden said.
“The margins aren’t very big in retail. They’re pretty thin to begin with,” Harden said.
For footwear made in China, where the majority of low-cost shoes are produced, tariff rates have gone from about 10% to over 70%. If all the different tariffs and markups are taken into consideration, the shoes that retailers will sell for $33 a year ago for $51, said Matt Priest, president of American footwear distributors and retailers.
Despite concerns about egg prices, the annual White House tradition of rolling Easter eggs across the south grass is set to progress this year.
“These are astronomical numbers that our members don’t need to deal with and are much worse than we expect,” the priest said. “The industry is kind of shocked. I’ve been calling almost all night because of the impact on American employment and how this will affect American consumers.”
Ultimately, higher costs will lead some retailers to stop selling certain low-cost shoes.
“I think there are many products that are not worth making anymore because they are not profitable,” the priest said. “It will be very limited to what is available to American consumers in the footwear field.”
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