Donald Trump's favorite tax is bad for the poor
One of Donald Trump’s signature policy proposals is to raise tariffs — he likes to call to call them “border taxes.” The president-elect hasn’t announced a specific proposal yet. But transition officials have said that they’re considering a 10 percent across-the-board tariff on everything imported into the United States — an effort to prevent manufacturers from moving working-class manufacturing jobs overseas.
But as Trump considers the proposal, he should keep in mind this chart, which shows that the tariffs we already have hit low-income Americans the hardest:
This chart comes from new research by Jason Furman, President Obama’s top economic adviser, and economists Katheryn Russ and Jay Shambaugh. The trio conducted a detailed analysis of current tariff rates and matched them up with data on spending by income decile.
As you can see, tariffs cut into the incomes of high-income households by less than 0.3 percent. Households further down the income distribution spend a significantly higher share of their incomes on them. The researchers warn that there are “well-known data quality issues with respect to the ratio of consumption to income for very low-income households,” so that bottom bar should be “interpreted with caution.” Regardless, the trend here is clear: Tariffs impose bigger burdens on households with lower incomes.
The kind of 10 percent across-the-board tariff that team Trump has suggested would significantly raise the cost of living for almost every American. It wouldn’t have exactly the same distributional impact as this chart shows — it’s possible that rich people would bear a larger share of the burden than with current tariffs. Still, the research is a reminder that tariffs impose significant costs for consumers at the lowest rungs of the economic ladder.