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Donald Trump has been warned that his “Liberation Day” tariffs could end up costing the average US household $4,200 (£3,235) a year. A broad 20% tariff would send consumer prices soaring by 2.1% to 2.6%, Yale Unversity’s Budget Lab said. It explained: “This is equivalent to a loss of purchasing power of $3,400-4,200 per household on average in 2024 dollars.”
The Lab added that the Federal Reserve, the US’s Central Bank, could step in to mitigate against the levy’s impacts, which would hit lower income houses the hardest. It said that the disposable income of the lowest-income households could drop by 5.5% if other countries retaliate with their own tariffs, while the highest-income families would see a 1.9% decline.
Splitting up the US into 10 groups based on income, tariffs would cost the second lowest group $2,400 (£1,850) if other countries retaliate, those in the middle $3,800 (£2,929), and $9,500 (£7,323) for those in the top tenth.
Its analysis, reported by Newsweek, also found that food prices would increase by 3.7% on average.
Stephen Barber, Professor of Global Affairs at the University of East London, previously told the Express that tariffs merely pass the cost on to the consumer as businesses must find a way to offset the extra fees.
He explained: “The country worst affected by this policy is the United States itself. Tariffs have the effect of pushing up inflation while slowing economic activity.
“That is they mean higher prices for consumers and lower growth or cash to spend for ordinary people. This in turn puts pressure on interest rates which will come down much more slowly.”
Daire Burke, head of finance broker Swoop Funding’s North American operations, added that the US agriculture and hospitality sectors are expected to be the hardest hit by the president’s tariffs.
He told the Express: “US farmers are bracing for retaliatory measures from trading partners such as China, Canada, and Mexico, which could further depress commodity prices and reduce export opportunities.
“The agricultural sector, already strained by previous trade disputes, faces heightened uncertainty and potential financial hardship.
“Restaurants and bars that rely on European imports, such as wine and spirits, are [also] preparing for significant cost increases due to potential 200% tariffs on these products.
“This could lead to higher prices for consumers and reduced profit margins for small businesses in the hospitality industry.”