As trade tensions rise around the globe, American consumers are starting to feel the impact. With a new wave of tariffs now in effect, everyday goods are getting more expensive, monthly budgets are being squeezed, and investment markets remain volatile. 

But what are tariffs, why are they important, and how much more could you end up paying? Here’s what you need to know about the real-world impact of tariffs on your expenses and how to respond.

What are tariffs and how will they affect you?

Tariffs are taxes imposed by a government on imported goods. While intended to protect domestic industries, encourage local manufacturing, or rebalance trade relationships, tariffs also come with a cost that is often passed down to consumers.

There’s a common misconception that tariffs only affect the countries they’re aimed at, but that’s rarely the case. If a U.S. importer is charged a 25% tariff on raw materials used to make a finished product, that added cost is often passed along to consumers in the form of higher prices—even if the product is manufactured domestically. As a result, tariffs can impact the price of items you use every day, from smartphones to sneakers and groceries to garden tools. In fact, according to The Budget Lab at Yale, the U.S. administration’s proposed tariffs could cost the average household $2,700 per year.[i]

How do tariffs work?

When a tariff is enacted, it adds a percentage-based tax to goods imported into the US. For example, in June 2025, the Trump administration imposed a 50% tariff on imported steel and aluminum.[ii] In practice, this means U.S. companies importing those metals now pay 50% more than they did previously. Those costs ripple through the supply chain. Manufacturers using aluminum face higher material costs, leading to increased prices for their finished goods. Retailers may further mark those products up to account for the higher costs. By the time the item is sold to consumers, it is significantly more expensive even though the tariff was applied further upstream.

What is a tariff war?

A tariff war occurs when countries retaliate against one another’s trade policies, escalating import taxes on both sides of the border. 

A prime example is the ongoing U.S.-China tariff war, which has seen both nations impose punitive duties on hundreds of billions of dollars in goods. The situation intensified in 2025 when the U.S. introduced new tariffs on Chinese technology products, citing concerns over national security and intellectual property. China responded with its own tariffs on American agricultural exports, consumer electronics, and professional services. At their peak, U.S. tariffs on Chinese goods rose to 145%, although those fell to 30% in May 2025 under a truce that still remains in effect as the nations try to negotiate a new deal.[iii]

Canada, a historically stable trading partner, is also caught in a tariff crossfire, with the U.S. targeting Canadian aluminum and lumber, and Canada retaliating with tariffs on U.S.-made electronics and household goods. Negotiations here are also ongoing.

These conflicts are driven by a mix of political, economic, and security concerns. Yet their consequences are the same: global supply chains are disrupted, costs rise, and consumer choice shrinks.

How do tariffs impact the broader economy?

At the macroeconomic level, tariffs tend to slow growth. According to estimates from the Tax Foundation, tariffs introduced in 2025 could reduce U.S. GDP by 0.2% without factoring in foreign retaliation.[iv] Additional tariffs proposed under the International Emergency Economic Powers Act (IEEPA) could reduce GDP by a further 0.6% if they are upheld by the courts.[v] 

Inflation is also a common result. When imported goods cost more, companies often raise prices or reduce supply, which both contribute to inflation. Many retailers have already signaled that they plan to raise prices heading into the holiday season due to elevated import costs.[vi] Additionally, companies in the construction and manufacturing sectors are seeing costs rise for items ranging from steel and aluminum to semiconductors, which could lead to delayed projects, reduced output, or potential layoffs.[vii]

How do tariffs affect your everyday expenses?

Beyond their effects on businesses, tariffs sneak into consumer costs in subtle, cumulative ways. Some of the more direct impacts could include rising prices for:[viii]

• Groceries such as fruit, vegetables, olive oil, and seafood
• Beverages such as coffee, beer, and wine
• Clothing and shoes
• Electronics such as smartphones and laptops
• Household appliances such as refrigerators and washing machines
• New cars and automotive parts
• Building materials such as lumber, tile, or fixtures

Even less obvious purchases can be affected. For example, tariffs on raw materials could push up the price of packaging, shipping, and warehousing, causing ripple effects on countless products like cosmetics or toothpaste. Restaurants could boost prices to account for costlier ingredients. Home renovation expenses may rise as well. Even insurance costs could go up to factor in price hikes for home or car repairs.

Can tariffs affect your investments?

While both the U.S. dollar and U.S. equity markets experienced significant one-day declines when the Trump administration formally announced reciprocal tariffs in April 2025, more recent announcements did not result in similar drops. That said, trade-related uncertainty can trigger stock market volatility. On the one hand, public companies directly impacted by tariffs could see reduced profits or lower earnings growth that may translate into weaker stock performance. On the flip side, companies that stand to benefit from tariffs could experience market gains. This article outlines some of these issues in more detail. 

How can you respond?

If you’re looking for ways to shield your budget from the effect of tariffs, here are some strategies to consider:

• Reassess your monthly spending to identify areas where costs are rising and consider switching to domestic brands or choosing generic alternatives.
• Adopt smart shopping habits by watching for seasonal sales, using price comparison tools, and potentially postponing discretionary purchases until prices stabilize.
• Shore up your emergency savings by maintaining a three- to six-month fund that can help you navigate both rising costs and broader financial uncertainty.

You should also evaluate your investment strategy. Investors in high-quality, globally diversified portfolios are likely to benefit by staying the course, given the outsized downside of trying to time the market. 

If you would like to better understand how tariffs may affect your spending or investments, now is a good time to talk to a financial advisor. Reach out to learn more about how we can help you rebalance your budget, align your investment strategy with your long-term financial goals, and navigate today’s uncertain economic environment.

This information is not intended as a recommendation. The opinions are subject to change at any time and no forecasts can be guaranteed. Investment decisions should always be made based on an investor's specific circumstances. Investing involves risk, including possible loss of principal.
 

[i] The Budget Lab. “State of U.S. Tariffs: July 23, 2025,” Yale University. July 23, 2025.

[ii] The White House. “Fact Sheet: President Donald J. Trump Increases Section 232 Tariffs on Steel and Aluminum.” June 3, 2025.

[iii] BNN Bloomberg. “Trump’s latest tariff deadline is approaching. Here are the trade deals the U.S. has announced so far,” by The Associated Press. July 30, 2025.

[iv] Tax Foundation. “Trump Tariffs: Tracking the Economic Impact of the Trump Trade War,” by Erica York, Alex Durante. July 29, 2025. 

[v] Tax Foundation. “Trump Tariffs: Tracking the Economic Impact of the Trump Trade War,” by Erica York, Alex Durante. July 29, 2025. 

[vi] Coupa. “The Tariff “Grinch”? New Data Suggest Tariffs Will Bring Higher Prices, Lower Margins, and Less Gifts This Holiday Season.” June 25, 2025.

[vii] BNN Bloomberg. “Trump’s tariffs could squeeze U.S. factories and boost costs by up to 4.5%, a new analysis finds,” by The Associated Press. July 29, 2025.

[viii] BBC. “Six things that may cost Americans more after Trump’s tariffs,” by Michael Race, Emma Haslett, Natalie Sherman. July 28, 2025; CNET. “Trump Tariffs Likely to Raise Prices on Refrigerators, Washers and More. How to Save on Appliance Purchases This Year,” by Courtney Johnston, Mike De Socio. June 9, 2025.

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