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.
Donald Trump’s favorite tax is bad for the poor
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.
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