With tariffs wavering back and forth, it’s critical to know how these changes can affect your budget. Especially if you’re in a lower income bracket, even a small hike in prices can negatively impact your entire month’s budget by putting more strain on the already expensive prices.
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Understanding those changes can help you plan accordingly and, ideally, avoid taking too big of a hit.
To that end, GOBankingRates spoked to some experts on the economy for insight into what the future might hold regarding the effects of tariffs — below is what they had to say.
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Imports Are Not Just for Fancy Things Anymore
There was once a time when people thought of imported goods as fine wine, art or high-end furniture. You may import a luxury vehicle. Of course, no one on a tight budget was thinking about these types of luxury imports.
But today, virtually anything and everything can be imported and if it’s imported, it will have a tariff. This means higher prices and less purchasing power for your budget.
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“Pretty much all goods manufactured today are to varying degrees important — there is, for example, no car made in the US and entirely of U.S.-origin parts,” said Dr. Brandon Parsons, economist at Pepperdine Graziadio Business School.
“The tariffs that are going to sneak up on lower-income Americans will be the ones on food — meat, fresh fruits and vegetables and specialty food items,” he added. “And the most hidden tariff impact will be on processed foods that incorporate imported foodstuffs — think tomato sauce made with Mexican or Canadian tomatoes.”
Retailers Will Pass Tariffs on to You
Some have assumed in recent months that companies distributing goods will absorb the cost of these tariffs. But nothing could be further from the truth.
“As Walmart and a growing number of retailers have made very clear, the cost of tariffs will be passed along to consumers,” Parsons said. This means you’ll have less purchasing power with your budget.
Inc.com reported that only 10 percent of businesses did not intend to pass along any of the tariff costs to their consumers.
You May Struggle To Buy Necessities With Your Budget
What this means for the low-income budget, then, is that items people need to buy will now cost significantly more than they used to. Most people living on low incomes are already struggling to make ends meet, often living paycheck to paycheck. These tariffs will make budgeting for basic, everyday necessities hard.
“Another reason is lower-income families will often live paycheck to paycheck and have a smaller (potentially no) cushion to absorb these higher costs. Without the ability to cover the higher costs created by the tariffs, lower-income families will be forced to adjust what they can purchase to a greater extent than their higher-income counterparts,” said Dr. Wayne Winegarden, senior fellow of business and economics at the Free Market Pacific Research Institute and director of PRI’s Center for Medical Economics and Innovation.
“Compounding these problems, the recent bout of inflation has created a huge affordability problem that harmed lower-income families to a greater extent than higher-income ones,” Winegarden added. “The tariffs will worsen the current affordability problem and further destabilize the household budgets of lower-income and working families.”
You May Have To Go Into Debt
Of course, families still have to eat, put a roof over their heads, buy clothes and perhaps get gifts for their kids on birthdays and important holidays. So, if they don’t have the budget on hand to make these purchases, you may choose to go into debt rather than cut out the necessities, which can turn bad really fast.
“If purchases are for essentials, forgoing them is not an option and debt can result. This can trigger a downward financial spiral, where persistent budget shortfalls lead to rising credit card balances, which in turn eat up more of a household’s limited disposable income,” Parsons explained. “Finally, tariffs are regressive, like sales tax, since individuals pay the same price for a product regardless of their income. This means tariffs carry a heavier burden on those with less income to spare.”
It becomes a vicious cycle for low-income families who may end up in a spiral they cannot pull themselves out of and with no end in sight. There’s no reason to expect incomes to rise or for tariffs to drop. And housing costs are not going anywhere but up for people in these situations.
From there, the drop into homelessness is not far, according to a study by the University of California, San Fransisco.
You May End Up In Evictions in the Worst-Case Scenario
If you can’t afford food and you can’t pay your bills, you can’t pay your rent with your low-income budget, the next natural step is eviction.
The effects are serious, life-altering and can be devastating.
“From a legal perspective, tariffs are within the government’s authority under the Commerce Clause, a portion of the Constitution that assigns to the federal government the power to regulate commerce, but they can spark lawsuits if misapplied,” said Seann Malloy, founder and managing partner of Malloy Law Offices.
“Low-income and working-class families that simply can’t absorb a 15% price hike on imported groceries may be subject to evictions or ruined credit, clogging our courts with cases I frequently litigate,” Malloy added. “Equal protection challenges could stem from relief programs that exclude some groups. It is important to push for transparent tariff impact assessments and the expansion of legal aid to protect vulnerable clients”
The best thing working-class people can do right now is to cut spending as much as possible to live well below their means. It’s also a good idea to take on a side gig or hustle that will increase their income, allowing them to start investing in themselves and growing their wealth. This can help create a more stable living situation that will help keep them in their homes and purchasing the necessities for their families.
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This article originally appeared on GOBankingRates.com: 5 Ways Tariffs May Affect Your Budget If You Earn a Low Income
