On Wednesday, President Trump finally announced his long-awaited "Liberation Day" tariff plan: a new 10% minimum tax on all goods entering the United States from overseas plus much-larger-than-expected "reciprocal" levies on imports from major trading partners such as China (34%), Japan (24%) and the European Union (20%).
To justify this unprecedented move — "one of the biggest, most abrupt economic gambles in presidential history," as Axios put it — Trump claims that his tariffs would raise "trillions and trillions of dollars" in government revenue, revive American manufacturing and restore fairness to global trade.
“Taxpayers have been ripped off for more than 50 years,” the president said Wednesday. “It is not going to happen anymore.”
But experts warn that everyday Americans will have to pay a steep price — literally — in order to make Trump's tariff dreams a reality (assuming that's even possible).
Stock markets have already cratered because of the tariff news, and China retaliated Friday with a matching 34% levy on all U.S. products.
"MY POLICIES WILL NEVER CHANGE," a defiant Trump said in response.
Here are three charts that explain how much "Liberation Day" could cost you, according to a new analysis by the nonpartisan Budget Lab at Yale University.
How big is Trump’s new tariff hike?
Back in the 18th and 19th centuries, America was a young, growing country seeking to establish itself on the global stage; protecting industries and raising revenue with high tariffs was the norm.
But since 1900 — and especially after World War II — the U.S. has led a global shift toward freer trade and lower prices.
Trump argues that this trend has gone too far; he’s now seeking to rebalance America’s relationship with the rest of the world.
To do that, the president has decided on a sudden, sweeping shift in America’s effective tariff rate. When Trump took office in 2017, the weighted average tariff on goods imported to the U.S. was around 1.5%, which he roughly doubled to 3% by the time he left office, in 2021.
Last year, under President Joe Biden, that rate fell to 2.4%.
But now the Budget Lab estimates that America’s tariff rate will skyrocket to 22.5% in 2025 — with about half of the increase coming from Trump’s “Liberation Day” tariffs alone.
The last time U.S. tariffs were that high was in 1909.
How much more will stuff cost?
Trump has long considered tariffs a cure-all for the U.S. economy, vowing that they will stop foreign governments from "ripping us off."
Yet nearly all economists disagree with Trump’s take, noting that a tariff is actually an import tax paid by the company doing the importing — not by the foreign country (or foreign business) sending its goods to the U.S.
The same experts have found that most importers simply pass the added cost of tariffs on to U.S. consumers by jacking up their prices — rather than going out of their way to replace the affected goods with American-made alternatives, which still tend to be more expensive. Then other countries retaliate with tariffs of their own, risking a global trade war and recession.
Meanwhile, any efforts to shift manufacturing to the U.S. take a long time and cost a ton of money — which is another expense that consumers might have to shoulder, at least in the short term.
This doesn’t mean that Trump’s new 34% “reciprocal” tax on Chinese imports will make your Chinese-assembled iPhone 34% more expensive; companies can decide whether to swallow the tariffs or raise their prices, and by how much.
But it does mean that there will be a lot of new upward pressure on prices. Clothing prices could rise by more than 18%, according to the Yale Budget Lab; fresh produce prices could rise by 4%; and new car prices could rise by 8.4% (or $4,000, on average).
How will all of this affect your disposable income?
The Yale Budget lab estimates that Trump’s 2025 tariffs will increase inflation by 2.3% — with more than half of that hike coming from his new “Liberation Day” levies.
Per household, that translates into an average loss of $3,800 in disposable income (i.e., the amount you can actually spend after paying your taxes).
But higher prices from tariffs don’t affect everyone equally; instead, they hit people at the lower end of the income ladder the hardest (because those are the people who have to spend the largest share of their earnings on necessities like food and clothing).
In the short run, Trump’s tariffs will cost $1,700 for Americans who make about $35,000, according to the Budget Lab — a 4% loss. On the other end of the spectrum, the same tariffs will cost $8,100 for Americans who make about $391,000 — a 1.6% loss.
