If Trump adds tariffs, ‘either way, there is a cost to consumers,’ economist says

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U.S. consumers would likely see prices increase if President-elect Donald Trump follows through with a plan to levy import tariffs, experts said Tuesday during CNBC’s Financial Advisor Summit.

“Either way, there is a cost to consumers,” said Erica York, senior economist at the Tax Foundation.

A tariff is a tax placed on imported goods. Tariffs are paid by U.S. companies that import those goods.

Businesses could pass along higher prices to consumers at the store to offset the cost of tariffs, for example, experts said.

Tariffs may also reduce business profits, thereby lowering returns for shareholders and perhaps pushing businesses to hold down wages or employment opportunities for workers, York said.

“It is such a company-specific decision,” she said.

In an NBC News interview that aired Dec. 8, Trump said he would fulfill his campaign promise to impose tariffs, but said he couldn’t guarantee U.S. households wouldn’t pay more because of tariffs.

“I can’t guarantee anything,” Trump said. “I can’t guarantee tomorrow.”

Trump imposed tariffs during his first term on washing machines, solar panels, steel, aluminum and a range of Chinese goods, for example. The Biden administration kept many of them intact.

Trump has called for a more sweeping tariff regime during his second term.

On the campaign trail, he floated the idea of universal tariffs, of up to 20%, on all trade partners, and of at least 60% on Chinese goods.

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Such a policy would raise costs by $3,000 in 2025 for the average U.S. household, according to an October analysis by the Tax Policy Center.

Low- and middle-income households “who might already be living paycheck to paycheck” would likely see the largest financial impact from tariffs, said Marianela Collado, CEO and senior wealth advisor at Tobias Financial Advisors.

In November, Trump also pledged to impose 25% tariffs on Canada and Mexico — the U.S.’ largest trading partners — if they didn’t address drug trafficking and migration across the border.

However, there’s considerable uncertainty around how tariffs might be implemented, including the countries and products that are targeted.

It’s also unclear if Trump has the authority to unilaterally impose universal tariffs, York said.

Some market experts aren’t convinced Trump means to follow through on his pledges.

His various tariff policies are likely “starting gambits” meant as leverage to “coerce” trading partners during negotiations, said David Zervos, chief market strategist at Jefferies, during the CNBC summit.

“People are trying to take something literal and at [Trump’s] word when we know that’s not how” he operates, Zervos said.

However, others were less sure of that outcome.

“I hope … they really are just negotiating tactics,” said Barbara Doran, CEO and chief investment officer of BD8 Capital Partners. “But they may not be.”

Tariff revenue may be used to help offset the cost of a tax-cut package Republicans are eyeing on Capitol Hill.

Trump also nominated Jamieson Greer as his U.S. trade representative; Greer was chief of staff to Trump’s former U.S. trade representative, Robert Lighthizer, who was an architect of Trump’s first-term tariffs.

“I think it’s still a big wild card,” Doran said of tariffs.