Shipping containers at the Port of Seattle on April 16, 2025.
David Ryder/Bloomberg via Getty Images
According to a recent analysis, tariffs imposed by President Donald Trump during his second term are expected to impact low-income U.S. households more adversely than wealthier ones in the short run.
Tariffs are essentially taxes that importers incur when bringing foreign goods into the country. Economists suggest that consumers will likely face some of these costs through increased prices, depending on how businesses choose to manage these expenses.
If current tariff practices continue, taxes for the bottom 20% of households could increase around four times more than those for the top 1% in 2026, according to findings released by the Institute on Taxation and Economic Policy (ITEP).
The lowest-income 20% of households, with expected earnings below $29,000 in 2026, would experience an increase in their tax burden amounting to about 6.2% of their income on average, based on ITEP’s analysis.
In contrast, households in the top 1%, earning over $915,000 annually, would see an average increase of just 1.7% in their taxes relative to their income, according to the same analysis.
Economists analyze the effects of policies in relation to household income because this approach helps showcase how these policies affect people’s disposable income and their overall quality of life.
Taxes Under Another Name
Researchers from the Heritage Foundation, a conservative think tank, stated in 2017 that “tariffs are just taxes on Americans by another name.”
They noted that such taxes raise the costs of essentials like food and clothing, which take up a larger portion of low-income families’ budgets, suggesting that reducing tariffs could lead to significant tax savings for these households.
There are already indications that some retailers are increasing prices.
A recent study by the Yale Budget Lab supported the idea that Trump’s tariffs are a “regressive” policy that disproportionately affects lower-income groups compared to wealthier ones.
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According to the Yale analysis, the immediate tax burden from tariffs is about 2.5 times heavier for those with lower incomes. This study considered tariffs and retaliatory measures as of April 15.
“Lower-income consumers will face greater challenges due to tariffs,” noted Ernie Tedeschi, director of economics at the Yale Budget Lab and former chief economist at the White House Council of Economic Advisers during the Biden administration.
Treasury Secretary Scott Bessent mentioned that tariffs might lead to a “one-time price adjustment” for consumers. He also indicated that trade policy forms a part of a broader economic agenda, which includes an upcoming legislative package of tax reductions.
“We are also developing the tax bill, and I believe that the reduction in taxes for working Americans will be significantly larger,” Bessent stated on April 2.
The future of the current tariff policies remains uncertain, as the White House suggested there might be trade agreements with specific countries and potential exemptions for certain products.
Trump has implemented a 10% tariff on most imports from U.S. trading partners, while Mexico and Canada face 25% tariffs on certain goods, and many Chinese products have tariffs as high as 145%. Specific items, such as aluminum, steel, and automobiles, also have a 25% duty imposed.
