For most of 2025, American consumers remained largely insulated from the full impact of President Trump's tariff regime. Businesses absorbed roughly 80% of the increased costs, squeezing their margins rather than raising prices. That dynamic is now reversing, and American households are about to feel the difference.

The Numbers Tell the Story

According to analysis from the Tax Foundation and corroborated by major financial institutions, Trump's tariffs amount to an average tax increase of $1,100 per household in 2025—a figure that rises to $1,500 per household in 2026 as businesses increasingly pass costs through to consumers.

The shift represents the largest effective tax increase on American consumers since 1993. Total tariff revenue reached approximately $300 billion in 2025, triple the roughly $100 billion collected in 2024 before the new tariff regime took effect.

"Businesses footed roughly 80% of the tariff bill in 2025, but businesses are starting to pass those costs along to customers, and that 80% could shrink to 20% later this year."

— JPMorgan analysis

How We Got Here

During his second term, President Trump enacted a series of steep tariffs affecting nearly all goods imported into the country. From January to April 2025, the overall average effective U.S. tariff rate rose from 2.5% to an estimated 27%—the highest level in over a century.

After negotiations and adjustments, the effective tariff rate settled at 16.8% by November 2025—still dramatically higher than pre-2025 levels but below the April peak. These tariffs generated $143.8 billion in new federal tax revenue, equivalent to 0.47% of GDP.

Why Businesses Can No Longer Absorb the Costs

The initial business absorption of tariff costs was never sustainable. Companies dipped into reserves, delayed investments, and accepted lower margins as a temporary measure while hoping for policy changes or negotiated relief. As it's become clear that the tariff structure will persist, businesses are adjusting pricing strategies accordingly.

Retailers have been particularly aggressive in planning price increases. The NFIB survey found that 54% of small business owners plan to raise prices in the next three months, with tariff-related cost pressures cited as a primary driver.

Where Consumers Will Feel It Most

The tariff impact varies significantly by product category. Consumer goods with high import content—electronics, clothing, furniture, and appliances—face the steepest increases. Kitchen cabinets, upholstered furniture, and vanities remain subject to 25% tariffs through 2026, though a planned increase to 30% was postponed.

Automobiles represent another significant exposure point for consumers. While the administration has carved out various exemptions and adjustments, vehicles and auto parts remain subject to tariffs that ultimately affect sticker prices and maintenance costs.

The Political Calculus

The timing of this cost shift creates potential political complications for the administration. As Trump prepares to kick off 2026, his approval rating has sunk to 36%—the lowest of any president at the end of his first year in the past five decades.

The tariff issue cuts across traditional partisan lines. While the administration frames tariffs as protection for American workers and industries, the reality of higher consumer prices creates tension with working-class supporters who feel the impact most acutely as a share of their household budgets.

New Tariff Threats Emerge

Even as households absorb the existing tariff burden, new trade threats loom. The administration recently announced that eight NATO allies would face 10% tariffs next month, rising to 25% by June unless they agree to support U.S. acquisition of Greenland. European officials have signaled they will retaliate, potentially triggering another round of escalation.

This pattern of using tariffs as a geopolitical lever has become a signature of Trump's second term. While it provides negotiating pressure in diplomatic contexts, each new tariff announcement adds uncertainty for businesses trying to plan supply chains and pricing strategies.

Supreme Court Wild Card

A significant unknown hangs over the entire tariff regime. The Supreme Court is currently determining the fate of tariffs established under the International Emergency Economic Powers Act (IEEPA). If the court rules against the IEEPA tariffs, the government may be required to refund the revenue collected—potentially returning billions to businesses and, indirectly, to consumers.

However, even legal experts skeptical of the tariffs' statutory basis are uncertain about the practical mechanics of any refund process, which would be unprecedented in scale and complexity.

What Households Can Do

Financial advisors suggest several strategies for managing the tariff impact:

  • Timing major purchases — If planning to buy appliances or furniture, earlier purchases may avoid additional price increases
  • Considering domestic alternatives — Some American-made products now compete more effectively on price
  • Adjusting budgets — Building in buffer for higher prices on imported goods
  • Watching for substitutes — Manufacturers are adjusting formulations and sourcing to minimize tariff exposure

The tariff era has fundamentally altered the calculus of consumer spending. While the full $1,500 per-household impact won't hit uniformly—it varies by consumption patterns and income levels—American families would be wise to plan for higher prices on the imported goods that have become integral to daily life.