Trump’s Tariffs Would Boost Inflation, Shrink the Economy, CBO Finds

Trump’s tariff plan amounts to a $3 trillion tax hike, and American households would see their costs go up by an average of $1,560

Washington, D.C. – Trump’s tariffs, which he proposed on the campaign trail, would hike prices on everyday goods and shrink the economy, according to a new estimate from the nonpartisan Congressional Budget Office (CBO). The estimate was requested by Senate Budget Committee Chairman Sheldon Whitehouse (D-RI), Senate Majority Leader Chuck Schumer (D-NY), and Senate Finance Committee Chair Ron Wyden (D-OR).

CBO examined the effects of a 10 percent across-the-board tariff on all imports and a 60 percent tariff on all goods imported from China. It found that the combination of those two policies would increase inflation by one percentage point by 2026, which the Senate Budget Committee calculated would cost American families an average of $1,560 per year, using methodology developed by The Budget Lab at Yale. CBO explained that Trump’s tariffs “would make consumer goods and capital goods more expensive, thereby reducing the purchasing power of U.S. consumers and businesses.” The tariffs would raise nearly $3 trillion through an effective tax increase on imports, including consumer goods and small business inputs. Inflation would likely be far higher for goods like electronics, which are chiefly manufactured abroad. CBO also found that Trump’s tariffs would shrink the economy by $165 billion by the end of the 10-year budget window, compared to a scenario without such a tariff policy.

“As Trump readies another round of his tax cuts for billionaires and large corporations, he wants to stick American families with the bill,” said Senate Budget Chairman Whitehouse. “Trump’s claims about tariffs are phony as hell, and his reverse-Robin Hood scheme would raise costs on essentials like groceries and clothes while shrinking the economy—all to reward his wealthy megadonors.”

“The CBO confirms what we have known about Trump’s agenda: only out for corporations, the ultra-wealthy, and the well-connected, at the expense of American families,” said Leader Schumer. “If the Trump tariffs were actually implemented – as he has threatened to do on Day One – they would raise costs and rip trillions of dollars out of American families’ wallets. The American people don’t need higher costs and won’t stand for it. Neither will we.”

“The Trump economic agenda, at its core, is a rich guy’s class war against people who work for a living,” Chair Wyden said. “His big economic plan is to pay for more tax handouts for corporations and the wealthy with a multi-trillion dollar tax hike on the products typical families and small businesses use every day. The middle class is already getting clobbered by the cost of living in this country, and Trump’s only going to make it worse.”

CBO calculated inflation using the Personal Consumption Expenditures (PCE) index. Because tariffs apply only to goods, which make up only one-third of the index, PCE understates the price hikes families would experience on household items.

As Republicans prepare to pass another wave of Trump’s tax cuts for the ultrarich, CBO has found that round two of their tax scam would add $4.6 trillion to the deficit and shrink the U.S. economy over the long term.