For more than a year, President Trump's aggressive tariff policies have reshaped global trade—and American pocketbooks. Now, with prices on everything from cars to couches reaching levels that squeeze middle-class budgets, one of Wall Street's most respected voices is making a bold prediction: the tariffs may not last.

The Affordability Breaking Point

Ed Yardeni, the veteran market strategist who runs Yardeni Research and has been calling markets for more than four decades, sees 2026 as a potential turning point. According to his analysis, the "affordability crisis" in durable goods—particularly cars, furniture, and appliances—has reached a level that could force a policy reversal.

"The pricing pressure may be the catalyst that pushes President Trump to reverse course on trade barriers."

— Ed Yardeni, Yardeni Research

The numbers support his concern. According to the Yale Budget Lab, as of November 2025, U.S. consumers faced an average effective tariff rate of 16.8%—the highest since 1935 and an increase of 14.2 percentage points from early January 2025. J.P. Morgan estimates put the current effective rate at 15.8%, up dramatically from just 2.3% at the end of 2024.

Where the Pain Is Concentrated

The tariff impact isn't hitting all sectors equally. Durable goods—products meant to last three years or more—have borne the brunt of price increases:

Automobiles

Car prices have surged as tariffs on imported vehicles and parts work their way through the supply chain. The average new car transaction price now exceeds $50,000, a threshold that was once reserved for luxury vehicles.

Furniture

Tariff rates on upholstered furniture were scheduled to increase to 30% on January 1, 2026. The administration delayed this increase for a year due to "ongoing productive negotiations," but the threat of higher prices remains.

Kitchen and Bath

Rates on kitchen cabinets and bathroom vanities were set to rise to 50% on January 1, 2026. This too was delayed, but homeowners looking to renovate are facing significantly higher costs than two years ago.

Appliances

Refrigerators, washing machines, and other major appliances have seen double-digit price increases as tariffs on imported components and finished goods accumulate.

The Political Calculus

What makes Yardeni's prediction compelling is the political dimension. The tariffs were sold as a way to protect American jobs and bring manufacturing back to the United States. But if the primary effect visible to voters is higher prices rather than new factory jobs, the political benefit evaporates.

A CNBC analysis suggests the opposite may be happening: tariffs "could end up lowering domestic head count" as higher operating costs force companies to cut staff. With the labor market already in what analysts describe as a "no-fire, no-hire" climate, the duties on U.S. imports could accelerate layoffs rather than create jobs.

Signs of Softening

Some observers see early indications that the administration is already reconsidering its approach:

  • Delayed furniture tariffs: The postponement of increases on furniture and cabinetry suggests sensitivity to affordability concerns
  • China chip access: Allowing Nvidia to resume chip sales to China represents a significant loosening of technology restrictions
  • O'Leary's prediction: Businessman and Trump ally Kevin O'Leary predicted that the administration will be "fine-tuning" tariff policy in 2026, particularly toward Canada and India

The Tax Refund Factor

Yardeni also connects the tariff question to another unusual feature of early 2026: the massive wave of tax refunds coming from retroactive OBBBA tax cuts. He suggests this "massive injection of liquidity into household bank accounts" could ease some of the affordability pressure and give the administration room to maintain tariffs without facing political backlash.

Alternatively, if refunds help consumers feel more comfortable despite high prices, the pressure to reverse tariffs could diminish.

The Supreme Court Wild Card

Hanging over the entire tariff debate is a legal challenge that could force the issue. The U.S. Supreme Court is currently evaluating the legality of President Trump's decision to impose sweeping tariffs under the International Economic Emergency Powers Act (IEEPA). A ruling is expected in early 2026.

If the Court rules against the administration, many tariffs could be invalidated, achieving by judicial fiat what the "affordability crisis" might achieve through political pressure.

Investment Implications

For investors, the possibility of tariff relief creates several potential opportunities:

  • Retailers: Companies that have seen margins compressed by tariff costs could see relief
  • Automakers: Both domestic and foreign auto companies could benefit from lower input costs
  • Home improvement: Home Depot, Lowe's, and similar retailers could see demand improve if renovation costs decline
  • Consumer discretionary: The entire sector could benefit from improved affordability

A 2026 Question Mark

Whether Trump ultimately reverses course on tariffs remains uncertain. The president has shown a strong commitment to his trade policies, and any reversal would require acknowledging that the approach had downsides. But as Yardeni notes, political reality has a way of trumping ideology—especially when voters feel the pinch in their wallets.

For now, the "affordability crisis" continues. Whether it becomes the catalyst for policy change or simply a feature of the new economic landscape will be one of the defining questions of 2026.