Skip to Content

Trump’s tariffs won’t hit all Americans equally. Here’s who gets hit the hardest

<i>Emily Elconin/Bloomberg/Getty Images via CNN Newsource</i><br/>A driver refuels their vehicle at a gas station in Berkley
Emily Elconin/Bloomberg/Getty Images via CNN Newsource
A driver refuels their vehicle at a gas station in Berkley

By Matt Egan, CNN

New York (CNN) — Lower-income Americans are likely to feel the brunt of the unprecedented tariffs President Donald Trump has set in motion.

The cost to lower-income families is magnified because economists say essentials like food, energy and auto parts are most exposed to the import tariffs Trump has threatened to impose over the next month.

In any financial shock, less affluent consumers typically have less room for error. But that’s especially true today because low-income families have been facing years of financial pressure due to a surge in the cost of living. Savings have vanished. Borrowing has spiked.

“US households are already suffering from high costs. This is going to add insult to injury,” Kimberly Clausing, a senior fellow at the Peterson Institute for International Economics, told CNN in a phone interview.

Trump tariffs on Mexico, Canada and China would cost the typical household about $1,200 per year, Clausing and her colleague Mary Lovely found in a new analysis. The good news is that Trump’s planned tariffs on Mexico and Canada have been delayed for a month. But the tariffs on China went into effect Tuesday morning, and China immediately retaliated with tariffs on US energy and metals.

That burden falls disproportionately on those who can least afford it: The tariffs on America’s biggest three trading partners will wipe out 2.7% of the income of the bottom 20% of earners, the Peterson Institute found.

“That’s a big hit if you’re living paycheck to paycheck,” Clausing said.

It’s more than double the 1.2% of income that would get slashed from the income of the top 20% of earners.

And the top 1% of earners would only lose 0.6% of their income, according to the Peterson Institute.

Clausing explained this is in part because lower-income families typically save less and spend more of their paychecks on goods like groceries and furniture and less on tuition and other items that won’t get impacted directly by tariffs.

Gregory Daco, chief economist at EY, said lower and middle-income families will “absolutely” get hit the hardest by tariffs.

Daco said that the combination of falling savings, higher debt burdens and tariffs is a “very risky” combination for the US economy. “We were already starting to see some cracks in the foundation of consumer spending,” he said.

One yellow light flashing on consumer spending is high debt levels.

The share of active credit card accounts only making the minimum payment climbed to nearly 11% during the third quarter of 2024, according to new estimates from the Federal Reserve Bank of Philadelphia. That’s the highest since records began in 2012.

The Philly Fed similarly found that a key delinquency rate on credit cards has more than doubled over the past three years.

The fact that Canadian energy may only be getting tariffed at 10% – if they go into effect next month – could limit the upward pressure on gasoline prices, as well.

Some of the retaliatory actions from China could shrink wages or even cause layoffs for manufacturers and farmworkers — including in red states that helped Trump win the 2024 election.

Economists have cautioned that higher inflation from US tariffs and retaliatory tariffs could delay future interest rate cuts from the Federal Reserve. That could keep borrowing costs on credit cards, car loans and other debt higher for longer, putting even more pressure on consumers.

Some executives are worried that higher tariffs and higher prices will limit how much Americans are able or willing to shop.

That’s one reason Matt Priest, president and CEO of the Footwear Distributors and Retailers of America, argues Trump’s tariffs are “counterproductive.”

“If everything is more costly and consumers have less disposable income that’s less money to buy shoes,” Priest, whose trade group represents Nike, Crocs and other brands, told CNN in a phone interview. “If you want to make a list of ways to drive up prices, this would be at the top of the list.”

The-CNN-Wire
™ & © 2025 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.

Article Topic Follows: CNN - Business/Consumer

Jump to comments ↓

CNN Newsource

BE PART OF THE CONVERSATION

KTVZ NewsChannel 21 is committed to providing a forum for civil and constructive conversation.

Please keep your comments respectful and relevant. You can review our Community Guidelines by clicking here

If you would like to share a story idea, please submit it here.

Skip to content