Here’s What President-elect Trump’s Tariff Plan Could Mean for Your Wallet

President-elect Donald Trump won Tuesday’s presidential election, in part by addressing Americans’ economic concerns higher prices.

Nearly half of all voters said their financial situation was worse than four years ago, the highest level on record since 2008, according to a report. NBC News Exit Poll.

But a cornerstone of Trump’s economic policy — imposing new tariffs on imported goods — would likely exacerbate Biden-era inflation. castigated during the election campaignaccording to economists.

There is still much uncertainty about how and when these tariffs might be implemented. If they were to take effect, they would likely raise prices for American consumers and disproportionately harm lower income earners, economists say.

The typical American household is estimated to pay several thousand dollars more each year for clothing, furniture, appliances and other goods.

“It’s bad for consumers,” said Mark Zandi, chief economist at Moody’s. “This is a tax on consumers in the form of an increase in the prices of imported products.”

“It’s inflationary,” he added.

He and others economists predict that the proposed tariffs would also lead to job losses and slower economic growth, on a net basis.

The Trump campaign did not immediately respond to a request for comment from CNBC on the impact of the tariffs or their scope.

A tariff is a tax imposed on imported goods.

Tariffs have been around for centuries. However, their importance as a source of government revenue has declined, particularly in wealthy countries, according to to Monica Morlacco, international trade expert and assistant professor of economics at the University of Southern California.

Today, the United States widely uses tariffs as a protectionist policy to protect certain industries from foreign competition. according to at the Brookings Institution, a think tank.

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Trump imposed tariffs during his first term, for example on washing machines, solar panels, steel, aluminum and a whole host of Chinese products. The Biden administration guard many of them are intact.

However, the proposals made by Trump during his election campaign are much broader, economists believe.

He floated a universal tariff of 10 or 20% on all imports and a tariff of at least 60% on Chinese products, for example. Last month, President-elect suggested vehicles from Mexico have a tariff of 200% or more, and in September threatened to impose a similar amount for John Deere if the company relocated part of its production from the United States to Mexico.

“To me, the most beautiful word in the dictionary is ‘tariff,'” Trump said at the Chicago Economic Club in October. “That’s my favorite word. It needs a PR company.”

A 20% global tariff and 60% levy on Chinese goods would increase costs by $3,000 in 2025 for the average American household, according to an October study. analysis by the Tax Policy Center. Trump’s plan would reduce average after-tax income by nearly 3%, according to the tax think tank.

Additionally, a 200% Mexican tariff on vehicles would increase household costs by $600 on average, TPC said.

American consumers would lose between $46 billion and $78 billion a year in purchasing power on clothing, toys, furniture, appliances, shoes and travel items, according to a National Retail Federation. analysis published Monday.

“I’m pretty confident in saying that (the tariffs) are price-raising policy,” said Mike Pugliese, senior economist at Wells Fargo Economics. “The question is simply one of magnitude.”

The reason for these higher costs: prices are paid by American companies that import goods. The “vast majority” of this additional cost is passed on to U.S. consumers, while only a portion is paid by U.S. distributors and retailers or by foreign producers, said Zandi of Moody’s.

Philip Daniele, president and CEO of AutoZone, alluded to this dynamic during a recent earnings call.

“If we get tariffs, we will pass these costs on to the consumer,” Daniele said in September.

The United States imported about $3.2 trillion worth of goods in 2022, for example, said Olivia Cross, North America economist at Capital Economics. A back-of-the-envelope calculation suggests that a 10% across-the-board tariff would roughly equate to a $320 billion tax on consumers, Cross said.

Of course, the financial consequences probably wouldn’t be that great, Cross said.

Trump’s plan could strengthen the strength of the U.S. dollar, and there could also be tariff exemptions for certain categories of goods or imports from certain countries, which would likely soften the overall impact, Cross said.

A 20% universal tariff and a 60% tax on Chinese imports would also generate about $4.5 trillion in net new revenue for the federal government over 10 years, according to the Tax Policy Center.

“The administration could take the tariff revenue and redistribute it to households through tax cuts in one form or another,” Wells Fargo’s Pugliese said.

Trump proposed various tax reliefs in the electoral campaign. Additionally, the tax cuts enacted by Trump in 2017 are due to expire next yearand tariff revenue could potentially be used to expand them, if Congress passes such legislation, economists said.

However, the typical American household would still lose $2,600 per year because of Trump’s tariff plan, even after factoring in an extension of tariffs. 2017 tax cutsaccording to a analysis by the Peterson Institute for International Economics.

The U.S. economy would also likely suffer from other tariff “crosscurrents,” Zandi said.

Even though U.S. companies that benefit financially from protectionist tariff policies could create jobs, the economy as a whole would likely lose jobs on a net basis, Zandi said.

Indeed, countries on which the United States imposes tariffs would likely retaliate by imposing their own tariffs on U.S. exports, which would hurt the bottom lines of domestic companies that export goods, for example, Zandi said. .

Higher prices for imported goods would also likely lead to lower consumer demand, which would weigh on corporate profits and could lead to layoffs, he said.

In June, the Tax Foundation estimated Trump’s tariff plan would reduce U.S. employment by 684,000 full-time jobs and reduce gross domestic product, a measure of economic output, by at least 0.8%.

Capital Economics expects the Trump administration to implement tariffs – and immigration restriction – in the second quarter of next year, the group said in a note Tuesday evening. Together, these policies would reduce gross domestic product growth by about 1% between the second half of 2025 and the first half of 2026 and add 1 percentage point to inflation, it said.