A new model projects the full slate of tariffs President Donald Trump announced on “Liberation Day” could cost the average American household $58,000.
An analysis from the Penn Wharton Budget Model found that many trade models fail to capture the full cost of the tariffs that Trump implemented and then paused on Wednesday.
PWBM projects Trump’s tariffs — as of April 8 — would reduce gross domestic product by about 8% and wages by 7%. Gross domestic product, or GDP, is a measure of economic output.
“A middle-income household faces a $58,000 lifetime loss,” according to the analysis. “These losses are twice as large as a revenue-equivalent corporate tax increase from 21% to 36%, an otherwise highly distorting tax.”
PWBM projected that Trump’s tariffs plan — as it existed before the 90-day pause — would raise more than $5.2 trillion over 10 years on a “strict conventional” basis and $4.2 trillion on a “partially dynamic” basis often used with tariffs.
The group said that’s about as much as raising the corporate income tax from 21% to 36%. Trump has no plans to raise the corporate income tax. Rather, he’s been pushing Congress to cut taxes, which includes an extension of the expiring rates in 2017 Tax Cuts and Jobs Act. That’s in the absence of recent tariffs.
“While raising the corporate tax rate is generally seen as highly economically distorting, tariffs would reduce GDP and wages by more than twice as much,” the report noted. “All households, regardless of age or income, would be worse off. The estimated economic declines are likely lower bounds, with actual declines potentially even larger.”
The analysis looked at several different scenarios: Consumers picking up 100% of the cost; Consumers picking up 75% and businesses the other 25%; and a 50-50 split.
“The economic burden of these tariffs can fall on either domestic consumers or businesses, depending on factors such as the elasticity of supply and demand for each product and businesses’ ability to pass on costs to customers,” the report noted. “In the short run, consumers and businesses are likely to share the burden, with more of it falling on consumers over time. Nonetheless, the macroeconomic performance does not differ significantly between these scenarios.”
