The new “reciprocal” tariffs announced by President Donald Trump this Wednesday will result in an average increase of more than $2,100 per year per American household by 2025, according to a report by Tax Foundation, a nonpartisan think tank based in Washington.
“The tariffs will reduce after-tax income by an average of 2.1%, and the top 1% of taxpayers will experience a smaller reduction of 1.8%. Meanwhile, per U.S. household, the tariffs will result in an average tax increase of over $2,100 in 2025,” the report notes.
The largest tax increase since 1982
Trump's tariffs, set to take effect in 2025, will increase federal tax revenues by $290.4 billion, which amounts to 0.95% of GDP. According to Tax Foundation, this figure makes it the largest tax increase in the U.S. since 1982.
They even surpass the tax increases approved during the administrations of George H. W. Bush, Bill Clinton, and Barack Obama.
The new policy imposes a base tax of 10% on most imports, as well as even higher tariffs for dozens of countries with a trade surplus with the U.S.
Additionally, it includes specific tariffs on sensitive regions or products as a means of pressure or commercial punishment.
“After weeks of anticipation and speculation, Trump fulfilled his tariff threats by declaring a base tax of 10% on imports from most countries and higher tariff rates on dozens of nations that have trade surpluses with the United States.”
Reaction of economists: Taxes paid by consumers
The measure has been met with skepticism from economists who warn that, although technically tariffs are imposed on importers, in practice it is the consumers who end up paying.
"Tariffs are a tax on importers that often gets passed on to final consumers."
If the most pessimistic forecasts come to pass, the tariff offensive will create inflationary pressure and negatively impact employment.
A study from the Budget Lab at Yale University warns that tariffs “penalize the poorest households the most”, which spend most of their income and lack savings to cope with rising prices.
Trump's Tax Promises: Cuts to Counter the Blow
To offset the impact of the new tariffs, Trump promised “the largest tax cuts” ever seen in the United States, in the form of a “big and beautiful law.”
The goal would be to extend the tax exemptions from 2017, which, according to the Center for Fiscal Policy, would benefit three-quarters of American households, although primarily those with incomes over $450,000 per year.
When will prices go up?
The effect on prices will depend on the reaction of companies. Some retailers and exporters may absorb part of the cost of the tariffs, but in many cases, the price increase will be passed on to consumers.
“Consumers could see overall prices rise one or two months after the tariffs take effect,” warn economists.
In products affected by higher tariffs, such as European imports (subject to a 20% tax), the impact will be difficult to absorb.
Moreover, some business owners might use tariffs as an excuse to raise prices beyond the necessary adjustment.
"When Trump imposed tariffs on washing machines in 2018, subsequent studies showed that retailers raised prices for both washing machines and dryers, even though there were no new tariffs on the latter," warns the study.
In this new context, consumers—already affected by the recent inflationary spike—may be more reluctant to accept further price increases and may reduce their consumption, which could limit price hikes.
Effect on imports: A decline of 900 billion
The Tax Foundation estimates that tariffs will lead to a reduction of more than $900 billion in imports by 2025, representing a 28% decline compared to the previous year.
This is due to the increase in the average tariff rate from 2.5% to 18.8%, the highest level since 1933.
The consequence: Consumers may choose to buy more expensive domestic products or forgo certain items that will now become inaccessible.
New Tariffs: Summary of the Report
The complete report details the new fee structure and its effects:
Trump proposes to impose tariffs under the International Emergency Economic Powers Act (IEEPA) on countries such as Canada, Mexico, and China due to issues like fentanyl.
It also includes national security tariffs on automobiles, auto parts, steel, and aluminum from all countries.
The average tariff on all imports will increase from 2.5% in 2024 to 18.8% in 2025.
The first wave of tariffs during his previous administration (2018–2019) impacted products worth $380 billion.
In 2025, tariffs will be extended to all imports, except for those from the T-MEC and a few related to energy, covering more than $2.5 trillion in goods.
The increase announced on April 2 will generate $1.8 trillion in tax revenue over a decade and reduce GDP by 0.5%. Together with previous tariffs, the total impact will be $3.2 trillion collected and a GDP reduction of 0.8%.
Countries like China, Canada, and the European Union have responded with retaliatory tariffs.
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