Employees working at a clothing factory in Vo Cuong, Bac Ninh province, Vietnam. Photo by SeongJoon Cho/Bloomberg via Getty Images.
The Trump administration’s proposal to impose hefty tariffs on products from a multitude of countries is anticipated to drive prices up for consumers dramatically. Items such as leather goods are expected to bear a more significant price increase compared to others.
The extent of the impact on households will depend on their spending habits. However, most families, particularly those with lower incomes, will likely experience some financial strain, economists predict.
Research from the Budget Lab at Yale University indicates that the average household might see a reduction of $3,800 in purchasing power annually due to President Donald Trump’s tariff policies, coupled with retaliatory measures from other countries announced as of this week.
That’s a significant hit, according to Ernie Tedeschi, the lab’s director of economics and former chief economist at the White House Council of Economic Advisers during the Biden administration.
The study does not account for China’s announcement of a 34% retaliatory tariff on all U.S. exports, which will begin on April 10. In 2024, the U.S. exported almost $144 billion worth of goods to China, making it the third-largest destination for U.S. goods following Canada and Mexico, as per the Census Bureau.
### Clothing Prices Set to Rise
The apparel industry stands as one of the most vulnerable sectors to the price fluctuations resulting from tariffs.
According to Yale Budget Lab’s analysis, clothing, shoes, gloves, handbags, and items made from wool and silk will see a price hike of 10% to 20% due to the tariffs imposed by Trump. Tedeschi points out that some of these price hikes could unfold over five years or more.
Most apparel and footwear available in the United States are produced in China, Vietnam, Sri Lanka, and Bangladesh, says Denise Green, an associate professor at Cornell University and director of the Cornell Fashion + Textile Collection.
Under the new “reciprocal tariffs” announced by Trump, Chinese imports will incur a 34% surcharge, with goods from Vietnam, Sri Lanka, and Bangladesh facing tariffs of 46%, 44%, and 37%, respectively.
Factoring in prior tariffs on China, which amount to 20%, the effective tariff rate for Beijing now exceeds 54%.
“The tariffs are catastrophic for the global apparel sector, but especially for smaller countries focusing on niche garment production,” Green remarked.
While clothing production has shifted overseas over the last five decades, Tedeschi believes it’s unlikely that these industries will return to the U.S. from Asia in response to the new tariffs. “People will continue to import clothing extensively and will have to absorb the price rise,” he noted.
### Car Prices: Another Challenge
The tariffs unveiled this week add to the host of others initiated by Trump since his re-election, targeting automobiles and parts, metals such as copper, steel, and aluminum, and specific imports from Canada and Mexico.
According to the Yale Budget Lab, the price of motor vehicles and associated parts may increase by over 8%.
Bank of America projects that if automakers pass the entire burden of these tariffs onto consumers, new car prices could surge by up to $10,000.
Rising car costs are a significant concern for many American families who need vehicles for daily essentials like commuting to work, attending school, and medical appointments, according to Erin Witte, director of consumer protection for the Consumer Federation of America. “The tariffs will exacerbate this issue, drastically limiting Americans’ choices when buying cars,” Witte added.
Tariffs on raw materials such as aluminum and steel have an indirect impact on consumers, given their widespread use in manufacturing goods.
White House spokesman Kush Desai has contested claims that Trump’s tariff policies will cause prices to surge. Desai emphasized that earlier predictions failed during Trump’s first term and won’t succeed now as the President seeks to rejuvenate American prosperity.
In Trump’s second term, the tariffs implemented are considerably more extensive than during his first. The initial term saw tariffs applied to about $380 billion worth of goods in 2018 and 2019, as reported by the Tax Foundation. In contrast, the current tariffs affect over $2.5 trillion in U.S. imports.
Evidence shows that first-term tariffs did lead to some price increases for consumers. For instance, the price of typical washing machines and dryers rose by roughly 12%, equating to $86 and $92 per unit, respectively, due to tariffs on washing machine imports in 2018. This increase cost consumers approximately $1.5 billion annually, as determined by a study from economists at the Federal Reserve Board and the University of Chicago.
### Tariffs Predicted to Heighten U.S. Inflation
Economists anticipate that these tariffs will contribute to a rise in the overall U.S. inflation rate.
American companies importing goods are responsible for the tariff costs, and it’s expected that they will pass at least a portion of these costs onto consumers.
Denise Green, director of the Cornell Fashion + Textile Collection, echoed concerns about the tariffs’ global impact on specialized garment manufacturing in smaller countries.
This environment of escalating prices for imported goods might provide U.S. businesses an opportunity to raise their prices as well.
As a result, Capital Economics estimates that the consumer price index could escalate to 4.5% by the latter half of 2025, up from 2.8% in February, nearly doubling the Federal Reserve’s long-term inflation target.
