The impact of high tariffs on most Americans is clear: they’ll have less money to spend. According to the Federal Reserve chair and many economists, including those at the conservative American Enterprise Institute, tariffs will increase prices of necessities like food, clothing, and cars, leaving people with less disposable income.
The estimated effect? A 2.3% “pay cut” or decrease in disposable income for every American household, translating to $3,800 a year. This is particularly concerning for lower earners, who spend nearly a third of their after-tax income on food alone.
Tariffs work by making imported goods more expensive, especially items not made or grown in the US. The cost of running factories will also rise as manufacturers need inputs from other countries. Some argue that tariffs are necessary to protect American workers and manufacturing jobs, but critics warn of a ripple effect on the economy that could be felt for years.
As globalization and free trade have benefited most consumers by making cheap goods available, opponents of tariffs believe this era is coming to an end. Companies will soon face the consequences of reduced demand, as Americans adjust to their new standard of living. The outcome remains uncertain, but one thing is clear: American wallets are about to take a hit.
Source: https://www.axios.com/2025/04/05/tariffs-personal-finances