American say they continue to feel the effects of the highest inflation in four decades, especially in grocery stores, where prices remain 26% higher than before the pandemic. The tariffs proposed by President-elect Donald Trump could cause even more financial stress in the nation’s food aisles by reigniting price increases, according to a new study.
Although it remains to be seen whether he is the president, ahead of the November 5 election, Trump proposed a 10% tariff on all US importsas well as a 60% tariff on products from China. Manufacturers and retailers typically pass some of these costs on to customers.
As a result, the massive new tariffs could affect prices for a wide range of consumer goods, from everyday items such as groceries to less frequent purchases like furniture, according to an analysis from Third Way, a left-leaning think tank. Trump’s tariffs could push the typical family’s annual grocery budget by 2025 to nearly $200 next year, an increase of more than 3%, according to Third Way.
“Prices are definitely going to go up, because the additional costs of the increased rates are going to be paid by consumers,” Gabe Horwitz, senior vice president for economic programs at Third Way, told CBS MoneyWatch. “And those price increases are going to make it harder for people lower on the income scale.”
Third Way has supported President Joe Biden’s economic policies and endorsed Vice President Kamala Harris in the election.
Trump spokeswoman Karoline Leavitt, who will be her White House Press Secretaryrefutes claims that President-elect Trump’s policies will boost inflation.
“In the first term, President Trump imposed tariffs on China that created jobs, accelerated investment and did not cause inflation. President Trump will work quickly to repair and restore the economy that makes American workers by re-shoring American jobs, reducing inflation, raising wages. real, cutting taxes, cutting regulations and unshackling America’s energy,” he said in a statement to CBS MoneyWatch.
Of course, the timing and magnitude of new tariffs imposed after Trump took office is unclear. Brian Peck, an assistant professor of international trade law at USC, recently told CBS News that the new administration could use tariffs primarily as a tool. to discuss influence in trade negotiations.
“If they don’t like a particular practice or policy initiative, they can use it as leverage to threaten,” Peck said. CBS News’ Carter Evans.
Tariffs are considered a regressive form of taxation, meaning they are hardest on the lowest-income consumers. This is because low-income families spend a larger budget on essentials like groceries, than those with higher incomes.
Horwitz and a team of economists combined estimates of what the average family of four might buy per week at the supermarket, noting that there could be considerable variation from one family to another. Researchers compared current average grocery prices to the potential costs if Trump follows through on his proposal to increase tariffs on all imports.
“We wanted to look specifically at what tariffs can mean for the family budget,” said Horwitz.
How much do groceries cost?
Researchers assumed a weekly trip to the grocery store would include buying coffee, beer, shrimp, beef, bananas, avocados, jam and olive oil.
While these may not be typical purchases for the entire family, the researchers focused on regularly consumed items that the U.S. relies heavily on imports for, or does not produce domestically.
Trump’s tariffs could cause families to spend at least $3.57 more on groceries each week, adding up to $185 a year, or a 3.3% increase, according to a Third Way analysis. The price increase will apply to each of the eight items on the sample grocery list.
Big box store prices
Consumers may also pay more for items they buy less often at big-box retailers like Walmart and Target, the Third Way found.
One US company has responded to the proposed tariffs. Steve Madden shoemaker He said he plans to import less goods made in China to the US, and replace them with items made in other countries.
“We have planned for a potential scenario where we have to move goods from China faster,” CEO Edward Rosenfeld told analysts on a recent earnings call. “We have worked hard over the years to develop our factory base and sourcing capabilities in alternative countries, such as Cambodia, Vietnam, Mexico, Brazil, etc.”
Families could pay an extra $551 a year at big-box stores, spending 14% from $3,754 to $4,305, according to Third Way research.
Big box store purchases will increase further as more of the items sold in those stores are imported from China.
“If you take Trump at his word, the sheer cost of tariffs for low-income families is astronomical,” said Horwitz.
Imposing steep new tariffs on other countries could raise economic costs in another way — by inviting a tit-for-tat levy on U.S. exports. Oxford Economics is predicting that the Trump administration will impose 30% tariffs on all Chinese imports and that Beijing will retaliate.
“Tariffs are a two-way street, and more aggressive tariffs by China will lead to greater retaliation,” Ryan Sweet, chief U.S. economist at Oxford Economics, said in a report. “We assume China will impose a 25% tariff on all U.S. exports, although there are exemptions for electronic products.”
Oxford also expects the US to catch up with Japan by 10% in metals and cars, triggering reciprocal tariffs on similar US exports.
