Why is Tariff Talk so Popular?
The Trump Administration has proposed significant Tariffs on three big manufacturers of U.S. goods: China, Canada, and Mexico. While the tariffs are paused for one month (ending early March), economists are weighing in on what will happen when they are put in place, and consumers are worrying about how much tariffs will increase their household expenses.
No one can say with absolute certainty what will happen to costs over the next year. Economists will make (extremely well) educated guesses, and finance experts will weigh in based on what they know about the government's proposed changes.
While we didn't have tariffs becoming one of the most important personal finance terms on our 2025 bingo card, we're all about financial education, so bring it on (the education, not the costs. Life's hard enough).
What is a Tariff?
When the US places a tariff on imported goods, the manufacturer (or importer) has to pay that extra tax to bring those goods into the country. To maintain their profit margins, the manufacturer typically passes that additional cost onto consumers through higher prices. It's similar to how any increased business cost (like higher material or labor costs) often leads to higher prices for customers.
Here are some other things that can happen with tariffs:
- Sometimes companies might absorb some of the tariff cost rather than passing it all to consumers
- Domestic producers (who don't pay the tariff) might also raise their prices since their foreign competition is now more expensive
- In some cases, companies might look for suppliers from countries not affected by the tariffs
Think of it in terms of the Bolder team's lifesource: coffee. ☕🤎
Imagine you love getting coffee from a café that imports special beans from Colombia. One day, the government puts a 20% tariff on Colombian coffee beans. Now when the café buys those beans, they have to pay an extra 20% to bring them into the country. The café owner now has three choices:
- Raise the price of your coffee to cover the extra cost
- Switch to different beans that aren't subject to the tariff
- Keep prices the same but make less profit
Most likely, your $4 coffee might become $4.80 to cover that extra cost. Just like if your favorite local pizza place had to pay more for imported Italian cheese - that extra cost would probably show up in the price of your pizza. (We also really love pizza). 🍕
How Much Will Tariffs Increase My Costs?
Yale Economists estimate that the average American household can expect an increase of about $1,250 annually due to the price increases in everyday items resulting from the tariffs. Other economists reflect a similar prediction, with household cost increases between $1,000 - $2,000 annually, on average.
There's no way to know with 100% certainty how prices will change for your household until we know exactly which tariffs will land, and which companies will increase prices, but it's a good idea to start reviewing your spending and make changes as needed. Check out our best money saving tips for reducing costs.
Worried that any increase in prices will be more than you can afford? Check out our ways to increase income in 2025.
Need help navigating all of this, and getting prepared? Use code TARIFF to get 20% off your membership with a Bolder Money Coach.
(We did not have a coupon code of TARIFF on our 2025 bingo card. Definitely did not.)
.avif)
