Trump's Tariffs Branded a 'Cruel Tax': Nearly 900k Americans, Many of Them Children, to Be Plunged Into Poverty

US President Donald Trump's tariff policies could plunge nearly a million Americans into poverty if they remain in place, according to a bombshell study by Yale's Budget Lab released this week. The researchers found that the current level of import taxes, which disproportionately affect lower-income households, will sharply erode purchasing power and widen economic disparities.

The study estimates that Trump's tariffs — if upheld by the US Supreme Court — would increase the number of Americans living below the poverty line by approximately 875,000.

'Tariffs are a tax on American families', John Ricco, associate director of policy analysis at the Budget Lab told CNN. 'Because tariffs are a tax on goods and services, instead of income, they hit harder on people who spend a higher percentage of income than they save.'

Poverty Rate to Rise — Especially for Children

The study estimates that Trump's tariffs could cause the official US poverty rate to rise from 10.4% to 10.7%, equating to an additional 875,000 Americans living below the poverty line. When using the Supplemental Poverty Measure — which considers government assistance and out-of-pocket expenses like healthcare and childcare — the poverty rate would climb from 12% to 12.2%, plunging an estimated 650,000 more Americans into poverty, including 150,000 children.

These figures are based on current effective tariff rates, which under Trump soared to 17.4%, the highest since 1935. Even with some consumption shifting over time, the long-term rate remains historically elevated at 16.4%, compared to 6.8% under pre-Trump levels.

'Because lower-income households spend a larger share of their budgets on tariff-affected essentials like clothing, household goods and basic electronics, they feel a heavier squeeze from even modest price increases', Leanna Haakons, president of Black Hawk Financial, told New York Post.

Sticker Shock at the Shops

Consumers are already facing price hikes on goods impacted by tariffs. According to the report:

• Leather goods (e.g., shoes, bags): prices up 37.3% short-term; 13.2% long-term
• Apparel: up 36.2% short-term; 12.8% long-term
• Motor vehicles: up 12%, translating to about $5,800 added to the price of a new 2024 car
• Food: up 3.4% short-term; 2.5% long-term
• Fresh produce: increases by 4.1%, settling at 2.7%

Though wholesale inflation dropped 0.1% in August, analysts at Barclays warned that the data was misleading, as falling retail margins may reflect businesses absorbing the costs of tariffs rather than passing them on — a situation unlikely to last.

Supreme Court Challenge Looms

The Supreme Court on Tuesday agreed to hear a case challenging Trump's authority to impose many of the tariffs. A lower court previously ruled that the President overstepped his powers under the International Emergency Economic Powers Act (IEEPA). If upheld, the decision could nullify approximately 71% of existing tariffs.

In a statement to NY Post, the Trump team dismissed the study as biased: 'The Biden economists running the Yale Budget Lab didn't get anything right when Biden was president, and they aren't getting any right now, either', said White House spokesman Kush Desai.

Echoing the sentiment, Trump spokesperson Taylor Rogers argued: 'The same America First agenda of tax cuts, tariffs, unprecedented investments, deregulation and energy dominance helped working-class households prosper while narrowing income inequality.'

A High-Stakes Gamble?

Critics argue that the tariffs may stimulate domestic production in theory, but in practice, they have raised prices on imported goods that low-income families rely on most.

'The concern is that what was sold as a patriotic economic policy has ended up being a regressive tax dressed in red, white and blue', said one trade analyst.

As of late 2024, 36 million Americans were living in poverty, according to the US Census Bureau. The latest figures from Yale suggest that number could grow dramatically under a sustained tariff regime.