Consumers are facing the highest tariffs since the Great Depression, and they stand to lose an average of $2,400 in household income this year due to the effects of trade turmoil.
That’s according to Friday’s Yale Budget Lab State of U.S. Tariffs report, which indicated that consumers currently face on overall average tariff rate of 18.3 percent (the highest since 1934), and after consumption shifts, that rate will stand at 17.3 percent, the highest since 1935.
President Donald Trump’s 2025 tariff regime disproportionately impacts fashion products, with shoppers facing 40 percent higher footwear and accessories prices and 38 percent higher apparel prices in the short term, according to the Budget Lab’s analysis of commodity prices. The researchers surmised that shoes and clothing stand to remain elevated in price, at 19 percent and 17 percent, respectively, for the long haul.
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The price levels resulting from the 2025 tariffs will rise by an average of 1.8 percent in the short run, assuming that the Federal Reserve declines to react to the new duty rates. Meanwhile, the U.S. gross domestic product (GDP) growth over this year and next year will be 0.5 percentage points lower each year. Over time, the country’s economy will shrink by 0.4 percent (or the equivalent of $120 billion annually in 2024).
According to the researchers, “In the long-run, tariffs present a trade-off” for U.S. GDP. On one hand, American manufacturing output stands to grow by 2.1 percent, “but these gains are more than crowded out” by contractions in other sectors, like construction output (slated to contract by 3.5 percent) and agriculture (expected to decline by 0.9 percent).
All tariffs issued to date this year will raise $2.7 trillion between 2026 and 2035, but there stand to be negative dynamic revenue effects—like reduced consumer spending and tariff retaliation from trade partners—that bring down that revenue to $2.2 trillion, a loss of $466 billion.
Thursday evening’s tariff shakeup informed these projections, when the Trump administration released a new list of “reciprocal” duty rates—some higher, and some lower—than those announced in April.
The implementation of the rates—aside from 35-percent duties on Canada, effective on Friday—will be delayed until Aug. 7. Notably, negotiations with certain key apparel sourcing partners are still in flux. Trump announced last week that Mexico and the U.S. plan to extend their current deal (by which the country to the South pays 25-percent tariffs on goods not covered by the free trade agreement), by three months to leave breathing room for further talks.
Meanwhile, the expiration of the bilateral pause on retaliatory duties between the U.S. and China ends Aug. 12, though trade officials from both nations have been heavily engaged in discussions about whether to extend the pause or broker a new agreement. While most of the tariff rates announced last week are higher than those announced by the president on “Liberation Day,” burgeoning apparel sourcing destinations like Bangladesh, Cambodia, Malaysia, Sri Lanka and Thailand will now see lower rates than previously threatened.
