From Cars to Clothes, Tariffs Cost Lower-Income Consumers $1,700 Annually

Less than a week into the new reality of tariffs, the impact to U.S. households is coming into sharper focus.

The hit to the family pocketbook will be significant, estimated in a new report by the Yale Budget Lab: as much as $3,800 annually. Breaking that down a bit, there’s a $2,100 hit from the “Liberation Day” tariffs that were announced on April 2 alone in the increased costs (just the import taxes alone) that companies will pass on to households. The tariffs that had been in place from tariffs on cars and on commodities such as aluminum will layer on the additional cost that add up to the $3,800 estimate.

“The price level from all 2025 tariffs rises by 2.3% in the short-run, the equivalent of an average per household consumer loss of $3,800 in 2024$. Annual losses for households at the bottom of the income distribution are $1,700,” according to the report.

Everyday Items See Price Hikes

As for the everyday items most impacted, the study indicates that:

• “Both the April 2nd tariffs themselves and all 2025 actions to date have disproportionately affected clothing and textiles. Apparel prices rise 8% from the April 2nd action alone and 17% from all US tariffs,” the Yale research indicates.
• Food prices are “also disproportionately affected,” rising 1.6% from the April 2 policy (which would be akin to the entire past year’s grocery inflation as measured by the Consumer Price Index) and 2.8% from all 2025 tariff actions. Fresh produce rises 2.2% and 4.0%, respectively.
• Beverages and tobacco prices get a 1.8% boost.
• The study estimates that computer and electronics prices will gain by 4.5% as an outcome of all tariffs levied to date.
• And the cost of replacing the aging family car, or adding a new set of wheels for the family we note, may become prohibitively expensive, as the April 2 announcement may not have an impact but the overall increase in new car prices through all the tariff actions taken to date will be about 8.4% or $4,000.

Merchant Sentiment and the Shifts in Household Budgets

PYMNTS Intelligence had estimated well before the seismic shock of last week’s events that consumer behaviors were changing.  More than three-quarters of individuals had felt that even as inflation had been cooling into the last few months of the year (albeit on a bumpy trajectory), 7 in 10 individuals surveyed said incomes had not been pacing price hikes. Around 77% of households had been noting the rising costs of groceries and a commensurate percentage had borne the brunt of higher household goods prices.

Roughly two-thirds of consumers live paycheck to paycheck (and a higher percentage of consumers earning below $50,000 annually are in that demographic), so spending behaviors look likely to continue to shift.

As Karen Webster noted in a column Monday morning (April 7), PYMNTS Intelligence data finds that 78% percent of consumers say they will cut back (buy less or buy cheaper), given the expected economic situation. “Even a decrease of 2% in overall spending across that group would amount to a loss of $92 billion every year to the U.S. economy,” she wrote, adding that “if prices increase by 10%, the PYMNTS Intelligence study finds that 18% of consumers say they will simply stop buying those items.”

The Yale study, as detailed above, has shown that price increases may be flirting with those levels or have surpassed them (as is the case with apparel).  In the meantime, separate research from PYMNTS Intelligence indicate that middle market firms are reluctant to pass on price increases to consumers, at least as an initial response. But the wiggle room may be constrained, and as the Yale data indicate, the impact to consumers will be widespread, and prolonged.

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