US consumers will likely bear the brunt of Trump’s tariffs Via Investing.com
Investing.com — As President-elect Donald Trump prepares to impose sweeping new tariffs, U.S. consumers are bracing for major economic shocks, according to the latest research note from ING.
Trump’s proposals include 60% tariffs on Chinese imports and 10-20% tariffs on foreign goods, aimed at boosting domestic production and reducing reliance on imports.
However, ING warns that these measures will lead to higher costs for consumers.
“Given that disposable income in the US last year was $20.547 trillion, this amount would represent 2.6% to 3.9% of disposable income, if transferred entirely to consumers. [the tariffs]ie $1,500 to $2,400 per person,” the bank wrote.
They explained that this would be a huge burden, as consumer spending drives 70% of the US economy.
Historical examples support this prediction, according to ING, noting that in 2018, a 20% tax on imported washing machines led to a 12% increase in prices within months, showing how costs are often reduced in the supply chain.
“Consumers bear more than 60% of the cost of imported electronics,” notes ING.
Additionally, while tariffs have significantly increased tax revenue — $257 billion under Trump-era duties as of 2018 — this revenue is largely offset by rising consumer prices.
ING highlights that tariffs act as a tax, reducing disposable income and limiting consumer choice.
They estimate that applying Trump’s proposed tariffs on $3.1 trillion in imported goods could raise revenue by up to $790 billion, but at a higher cost to households, equal to 2.6-3.9% of disposable income.
ING warns that such policies could also drive up inflation, which could add one percentage point to current levels.
“Changes in consumer behavior are one of the reasons why tax increases are not the main source of government revenue,” ING concluded, underscoring the broader economic challenges that could arise.
