MW Sweeping tariffs are finally here. Americans say they aren't ready - especially this group.

By Andrew Keshner

The annual price tag on more tariffs could be over $1,200, by one estimate

The sweeping tariffs that President Donald Trump has been talking about since he was on the campaign trail are finally here, and they're arriving at a tough time for many Americans.

That's according to surveys, earnings reports, rising credit-card bills and decreasing savings-rate data, which point to many wary consumers who aren't ready for more price hikes as a trade war erupts.

The latest wave of tariffs on goods from Mexico, Canada and China could lead to a nearly $1,000 annual increase in the cost of goods for households, on average, according to Nationwide Chief Economist Kathy Bostjancic. Researchers at the Peterson Institute for International Economics estimated last month that the median cost of tariffs per household would be more than $1,200 a year.

The new wave of tariffs are aimed at improving border security, Trump and administration officials say. But the tariffs may also translate to higher everyday costs if companies pass on some of their tariff expenses to consumers.

Almost half of people surveyed between late January and early February said new tariffs on Canadian and Mexican imports, and new duties on Chinese imports, will be "bad" for their household finances, according to Morning Consult.

Almost two-thirds of people told the public-opinion research firm they were trying to save more money ahead of tariffs. They may face an uphill battle: Personal savings rates, or the amount of money people have left over after paying their bills, fell throughout 2024, according to the Commerce Department.

One strategy that consumers can use in the face of tariffs is to speed up already-planned big purchases or cancel them altogether. But that's not a tactic everyone can use. Some purchases can't be put off. That strategy also assumes that people have cash on hand that they can stash away to use later. Not everyone has that luxury. The less money a person has, the tougher tariffs will be for them, according to experts watching Americans' balance sheets.

The tariffs come as consumers are still recovering from four-decade-high inflation in 2021 and 2022 during the Biden administration. Consumers are worn out and the sticker prices on goods and services now average 25% to 30% more than 2018, said Bea Chiem, retail & consumer managing director at S&P Global Ratings.

Big-picture data, like consumer spending and low jobless rates, suggest that consumers are generally holding up, but the strain on consumers was already building before tariffs came into play, she said. "Consumers are spending their savings, using more credit-card debt, and the wealth and income gap is widening between higher- and lower-income earners," Chiem told MarketWatch.

Lower-income households devote a bigger slice of their budgets to necessities than people with more resources do. As the prices of those essentials have risen, they've turned to credit cards and loans to cover costs after running out of savings, said Cris deRitis, deputy chief economist at Moody's Analytics.

"Higher costs due to tariffs will add to their financial stress and lead to higher delinquency rates on consumer credit," he said.

America's collective credit-card bill is over $1.2 trillion as of the fourth quarter, according to the Federal Reserve Bank of New York. Delinquency rates on credit cards are at levels last seen in early 2011, just after the Great Recession. Car-loan delinquencies are at their highest point since the end of 2010.

Overall, Americans' finances generally look good, Federal Reserve Vice Chair Philip Jefferson said in a speech last month. But looking closer, the picture isn't as pretty, he noted.

Low- and middle-income households are wealthier than they were before the pandemic, but the cash cushions they have available are now slimmer, he said in remarks that did not explicitly discuss tariffs. That suggests "certain groups of households may have a hard time weathering unexpected costs or economic shocks," Jefferson said.

Earnings add to the consumer gloom

The launch of the Mexico-Canada-China tariffs coincides with the corporate earnings season, giving a real-time glimpse of the impacts.

Eight in 10 shoppers are worried about tariffs crimping their finances and shopping, according to a separate poll from Numerator, conducted in early February. People said they'll be looking for deals and coupons, stockpiling ahead of any price hikes or delaying purchases, the poll said.

Their instincts appear to be correct. On Tuesday, major retailers like Target and Best Buy joined a downbeat chorus of companies detailing how their customers could feel the effect of tariffs.

China and Mexico are the first and second top sources for products sold at Best Buy, CEO Corie Barry told analysts.

The appliance and electronics big-box store directly imports 2% to 3% of its array of goods, but "we expect our vendors across our entire assortment will pass along some level of tariff costs to retailers, making price increases for American consumers highly likely," Barry said. The retailer said the effect of tariffs could start showing between the second and fourth quarters.

Target shoppers may see higher prices on certain fruits and vegetables, like strawberries, avocados and bananas, very soon, Target CEO Brian Cornell said. Considering the supply chain from Mexico, particularly in the winter, "the consumer will likely see price increases over the next couple of days," he said in a CNBC interview.

Target $(TGT)$ and Best Buy $(BBY)$ shares closed lower, by 3% and 13% respectively, as parts of a broad market selloff Tuesday. The Dow Jones Industrial Average DJIA fell 1.55% and the S&P 500 SPX tumbled 1.22%.

"Tariffs of this nature will increase prices paid by consumers, full-stop," said Elizabeth Renter, senior economist at the personal-finance site NerdWallet. There could be ripple effects too, with consequences beyond import prices, because it may become more expensive to make goods in the U.S. and produce jobs, she said.

"People are extra sensitive to increasing prices right now, and domestic manufacturers and retailers know this," said Renter. "Even if they try to buffer some of the consumer impact of tariffs, that impact will have to go somewhere. The knock-on effects of broad-based tariffs extend into the labor market and economic growth overall."

Tariffs have been on the table for a long time, and now that they're officially here, that's removed some of the uncertainty. But still, Renter added, "consumers and businesses will be making a lot of only partially informed guesses about the future of the economy."

-Andrew Keshner

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March 04, 2025 17:09 ET (22:09 GMT)

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