Why Trump's tariffs would hit poor and middle-class Americans hardest

By Chris Matthews

A new report estimates middle-class families would pay an extra $3,370 per year for imported goods

Donald Trump has promised a deluge of tax cuts on everything from tips to Social Security income, but so far has only one major policy idea for raising federal government revenue: tariffs.

The former president and current Republican presidential nominee believes that taxing American importers of foreign goods will spark a manufacturing renaissance at home. But their ultimate effect is unknown, since no economy in modern history has instituted a 20% universal tariff, as Trump is proposing.

Two new studies published Monday attempt to quantify the impact, with both seeing the policy as likely raising trillions of new tax dollars that may blunt the budget impact of costly tax cuts - but which would also hit the middle class and poor Americans hardest.

See also: Trump and Harris say they want to cut taxes. Here's why you should prepare for a tax hike.

"While targeted tariffs can have a useful role in trade policy, economists agree that tariffs, particularly broad-based tariffs, raise the prices paid by consumers and businesses on the goods and services they buy," wrote Steve Wamhoff, federal policy director at the Institute on Taxation and Economic Policy, in a Monday report.

"The sweeping tariffs proposed by Trump, which are far larger than any on the books today, would raise the prices faced by American consumers across the income scale," he added. "Because lower- and middle-income families must spend a larger share of their earnings to make ends meet, this would have a particularly noticeable impact on their household budgets."

The Trump campaign didn't immediately respond to a request for comment.

Wamhoff estimated that a 20% tariff on all imported goods, and a 60% tariff on imports from China, would cost a family among the poorest 20% of Americans $930 per year, while the middle 20% earning between $55,100 and $94,100 annually would pay an extra $3,370 per year.

The tariffs would cost a family in the richest 1% $42,050, but that figure would be more than compensated by the lower income and business taxes that Trump has proposed.

Trump's overall plan would result in steep tax cuts for the wealthiest Americans while raising costs for everyone else, according to the ITEP analysis.

It's also possible that the Trump tariffs are so disruptive to the U.S. economy that they end up raising little revenue.

Read more: A Democratic sweep could mean a $2 trillion tax hike for S&P 500 companies over coming decade

The Committee for a Responsible Federal Budget published an estimate Monday that said that, in a worst-case scenario, Trump's tariff policy could end up lowering government revenue by $2 trillion over 10 years. In a best-case scenario, the group found them raising $4.3 trillion, though its base case sees the plan raising $2.7 trillion over a decade.

The highest-cost scenario incorporates potential "dynamic effects" of the policy - namely, that foreign countries are likely to retaliate with tariffs of their own, and that consumers will have less money to spend, with knock-on effects in the form of lower wages and lower business investment.

"Such a significant change to trade policy could have economic and geopolitical repercussions that go beyond what a standard tax model would estimate," the CFRB wrote. "Due to the novelty of this policy, the true economic impact is hard to predict."

-Chris Matthews

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10-07-24 1350ET

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