New York (CNN) — President Donald Trump’s sweeping tariff regime is already reshaping global trade and spiking government customs revenue. But these historic import taxes could also push more Americans into poverty, according to new research.
An analysis published by The Budget Lab at Yale finds Trump’s tariff hikes will likely increase the number of Americans living in poverty by 875,000 in 2026. This increase includes an additional 375,000 children in poverty.
The figures are based on the Official Poverty Measure, a long-standing poverty metric based on pre-tax income.
Tariffs and related price hikes tend to hit low-income families the hardest. Less affluent households typically spend a bigger chunk of their paychecks than high-income families on living expenses, meaning they’re more vulnerable to shifts in prices.
Not only that, but economists say lower-income households often buy more imported products — which are most exposed to tariff-driven price hikes — than higher-income households.
“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.”
The Budget Lab also estimates the poverty rate would increase to 10.7% after accounting for Trump’s tariffs, up from 10.4% without tariffs.
Living paycheck to paycheck
There were nearly 36 million people living in poverty as of the end of last year, the US Census Bureau reported Tuesday. The poverty rate dipped 0.4 percentage points to 10.6% as paychecks and earnings largely kept up with the cost of living, the Census Bureau found.
The Budget Lab found that poverty would also rise when it analyzed the supplemental poverty measure, a more comprehensive gauge that factors in government programs like food stamps as well as child care, medical and other expenses.
Trump’s tariffs will likely increase the number of Americans living in poverty by 650,000 in 2026 under the supplemental poverty measure, according to the analysis. That includes 150,000 children. The poverty rate would rise from 12% to 12.2%.
The findings underscore the consequences of tariff-driven price increases, especially for Americans who are already living paycheck to paycheck. Higher prices risk eroding consumers’ purchasing power, and for those living paycheck to paycheck this can be quite painful.
In a statement to CNN, White House spokesperson Taylor Rogers argued that the economic agenda during Trump’s first term helped “working-class households prosper while narrowing income inequality.”
“As that same America First agenda of tax cuts, tariffs, unprecedented investments, deregulation, and energy dominance continue to take effect during President Trump’s second term, Americans can trust that Joe Biden’s economic disaster is coming to a close,” Rogers said.
‘Not as weak as it appears’
The White House spokesperson also pointed to the cooler-than-expected wholesale inflation report released Wednesday as evidence that “inflation has cooled and tariffs have not hiked prices like the so-called experts have predicted.”
Producer prices unexpectedly fell by 0.1% between July and August, allowing the annual inflation rate to ease to 2.6%.
However, the drop was driven by a decline in trade services, a category that reflects retailer and wholesaler profit margins. The drop in profit margins suggests businesses are absorbing higher costs driven by tariffs in their bottom lines.
Of course, weaker profits could cause some businesses to pass those costs along to consumers in the form of higher prices, or make cutbacks elsewhere such as by hiring less or laying off workers.
Economists at Barclays cautioned that August wholesale inflation was “not as weak as it appears” and noted that outside of trade margins, “inflation was reasonably firm.”
Highest tariffs in nearly a century
The tariff hikes under Trump have been historic.
Based on the tariffs imposed by Trump this year, the average effective tariff rate in the United States has spiked to 17.4% — the highest since 1935, according to The Budget Lab.
If the current tariffs imposed by Trump are maintained, the average effective tariff rate would climb to 17.4%.
Of course, trade policy has been changing rapidly throughout the year. And at the same time, the bulk of Trump’s tariffs are currently in legal limbo.
The Supreme Court on Tuesday agreed to hear arguments over Trump’s global tariffs. The administration is hoping justices will overturn a lower court ruling that struck down the country-specific tariffs, finding the president unlawfully leaned on emergency powers.
If the Supreme Court declares the tariffs illegal, it would erase the vast majority (71%) of the 2025 tariffs imposed, The Budget Lab found. But analysts and Trump officials have noted that the president has other powers he could lean on to try to keep many tariffs in place.
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