Tariffs on imported goods are a favored proposal in the eyes of President Donald Trump, who is imposing sweeping universal tariffs.
As of April 9, 2025, the United States has implemented a 10% baseline tariff on most imports (currently paused for 90 days), with escalating rates targeting specific nations. That includes a more than 100% levy on Chinese goods and 25% on foreign automobiles.
These measures have triggered price increases and retaliatory actions from trading partners.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The Trump administration's tariffs are at historic levels, and the results could be troubling for U.S. consumers. Tariffs are said to cause prices of everyday goods to spike.
Here’s what you should know about what's happening with tariffs and how they impact your finances.
What are tariffs?
Tariffs are taxes that governments impose on goods and services imported from another country. Tariffs can be a source of revenue for a country but can also be used as a barrier to regulate international trade and safeguard domestic industries.
Governments generally impose tariffs for several reasons including to:
- Raise revenue
- Protect consumers and domestic industries
- Safeguard the nation from unfair trade practices
However, taxing imported goods can make those products more expensive to consumers. Tariffs also can make local products more attractive to buyers and spur competitiveness in the market, price gouging by locals — or in some cases, inflation.
Tariffs are still implemented as a “targeted tool” to protect the U.S. against unfair trade practices. However, data show that using tariffs as a revenue source can harm low- and middle-income households and benefit those with higher incomes.
How tariffs work: Who pays for tariffs?
When Trump imposed tariffs on various imports during his first term, U.S. consumers and firms were the hardest hit.
- When tariffs are levied on imports from foreign countries, the U.S. directly pays import taxes (tariffs) to the U.S. government for their purchases abroad, according to the Tax Foundation.
- However, the economic burden of tariffs generally falls on consumers. After U.S. businesses pay import tariffs, they often pass on price increases to consumers to make a profit.
- As part of the collateral damage from tariffs, consumers might see prices of goods increase or product stagnation, to name a few.
For example, if a U.S.-based car business is paying $20,000 to import a vehicle from China, a 60% tariff would mean $12,000 more to import that car. Some of that price increase might be passed onto the consumer, resulting in a more expensive car.
"Tariffs are ultimately paid for in large part by consumers and businesses in the domestic economy," the Tax Foundation underscored during the pandemic.
Where will you see prices increase due to tariffs? Pretty much across the board, from essentials such as food and medicine to toys and apparel. Here are a few examples of tax increases on everyday items.
- $200 on food
- $210 on medicine
- $300 on electronics
- $220 on apparel, footwear, and jewelry
Are tariffs good or bad?
Overall, tariffs can be a double-edged sword, offering political leverage and domestic protection while imposing regressive consumer costs and economic risks.
Right now, Trump's sweeping tariffs will likely harm most households and GDP growth, though specific industries could benefit, depending on what happens with the levies and retaliation.
While every U.S. household would likely see a tax increase under Trump’s tariff plans, the highest earners would benefit the most. That’s because, as the Peterson Institute for International Economics (PIIE) finds, high tariffs often imply a “massive shift of the tax burden from richer taxpayers toward lower-income households.”
Under a 10% worldwide tariff and 60% tax on imported Chinese goods, the Tax Policy Center projected that U.S. households could see declines in after-tax income anywhere from 1.7% to 1.9%.
However, those in the top 0.1% would see their after-tax income fall by about 1.4%. Those impacts will be more significant, given the 104% tariff recently imposed by Trump on China.
In dollar terms, Trump’s higher tariffs likely mean:
- Lower-income households (those earning up to $32,800 a year) would pay about $320 more in taxes (an after-tax income decline of 1.7%)
- Middle-income households (earning from $63,300 to $113,100) would pay about $1,350 more in taxes (an after-tax income decline of 1.8%)
- The top 0.1% (those earning more than $4 million annually) would pay about $133,000 more in taxes (representing an after-tax income decline of 1.4%)
“It’s a high-stakes game, and what is at stake is the health of the US economy and that of the rest of the world,” the organization recently noted.
Trump tariffs: Bottom line
Sweeping tariffs are a key part of Trump’s second-term policies. Most economists who oppose this policy see it as a tax that could harm those with lower and middle incomes.
While tariffs can foster less dependence on other countries' goods and promote competition, they're taxes that can increase prices for consumers such as you.
Separately, Trump has floated the idea of an External Revenue Service that would collect tariffs and fees. Details aren't available yet.
Read More
- What Trump Isn't Telling You About His 2025 Tax Plans
- Trump’s Pitch for an ‘External Revenue Service’ Agency Attempts to Shroud Who Pays for Tariffs
- What's Happening Now With Trump Tariffs?
-
Five Smart Moves for Retirement Healthcare: From HSAs to Medigap PoliciesUnchecked health care costs in retirement could blow a hole in your savings. Here’s how to avoid that.
-
Capital One Venture X Lounge Access Rules Are Changing – Here’s How to Keep Your AccessYour Capital One Venture X lounge access perks won’t be quite as generous as they used to be. Here’s what’s changing.
-
Ask the Editor, May 30: Questions on the One Big Beautiful BillAsk the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on the House-passed “One Big Beautiful Bill.”
-
Trump Tariffs: Will Walmart, Target and Nike Still Raise Prices in 2025?Tax Law Walmart and other major U.S. retailers were bracing for price hikes due to steep tariffs, but now that could change.
-
What Do Trump's Pardons for Rich Tax Evaders Mean for IRS Enforcement?Tax Law Recent pardons raise questions about tax fairness and the difference between tax avoidance and evasion.
-
Are Clean Energy Tax Credits a Thing of the Past?Tax Credits Now that the House GOP mega bill has passed, some wonder whether energy-efficient incentives like solar, electric vehicle, and home improvement tax credits could go away.
-
Employee Retention Credit Refunds Could be at Risk Under GOP Tax BillTax Credits Millions of small-to-mid-size businesses could be denied the pandemic-era ERC under Trump’s tax agenda.
-
Big GOP Tax Bill Could Change Your Estate Planning for 2025Tax Law The GOP might extend and increase the higher estate and gift tax exemption and AMT thresholds. What might this mean for your estate plan?
-
Millions Could Lose SNAP Food Benefits Under Trump Tax Cut PlanTax Policy The House Agriculture Committee approved nearly $300 billion in cuts to SNAP benefits, putting many at risk of hunger.
-
The GOP Wants to Auto-Enroll Your Child in a MAGA Savings AccountTax Law The federal government could auto-enroll your kid in a tax-advantaged ‘Trump savings account’ if the House GOP tax plan becomes law.
