Americans to Lose $500 Billion a Year Due to Tariffs

1. Donald Trump’s plans to impose tariffs on imports could cost Americans half a trillion dollars a year.
2. The proposed 10% tariff on all imports could burden working-class Americans and hit lower-income households harder.
3. Economists warn that tariffs raise the cost of goods domestically, could cause inflation to spike, and potentially spark a recession.

Donald Trump, in his bid for re-election, has proposed imposing tariffs on imports, but estimates from a Washington DC-based think-tank suggest that this could end up costing Americans around $500 billion a year. The Peterson Institute’s researchers caution that Trump’s plan to impose a 10% tariff on all imports could amount to nearly 2% of US GDP, which would particularly burden working-class Americans. The proposed tariffs would hit lower-income households the hardest, potentially reducing after-tax incomes by about 3.5% for those in the bottom half of the income distribution.

Economists generally agree that tariffs raise the cost of domestically purchased goods because taxes on imported items are often passed along to consumers in the form of higher prices. Despite Trump’s claims that foreigners bear the tariff impact, economists assert that tariffs ultimately burden those who buy imported goods domestically. Trump’s plan includes a 60% tax on Chinese imports, but even a 10% across-the-board tariff could equate to an annual $1,500 consumption tax per household.

Experts have criticized Trump’s proposed tariffs, warning that they could lead to a spike in inflation and potentially trigger a recession. The plan is viewed as a regressive form of fiscal policy that combines tax cuts favoring the wealthy with tax increases that affect lower-income households more significantly. The researchers point out that Trump’s tariff proposals would compound the distortions and burdens created by previous tariffs and could cause extensive collateral damage to the US economy.

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