Tariffs Still Loom Large—3 Ways They Could Affect Your Budget

President Donald Trump’s tariffs could create a trade war with back-and-forth retaliatory tariffs, raising consumer costs and unemployment rates.

Trump imposed a 10% tariff on Chinese imports early Tuesday morning, and hours later, China retaliated with its own tariffs against U.S. imports. A 25% tariff on imports from Mexico and Canada has been delayed for one month but still looms.

There is still uncertainty about which tariffs will actually be imposed and what the retaliation may come. That’s made it hard for economists to forecast the potential economic impact. However, economists said there are a few ways the tariffs could influence your personal finances.

Your Electronics—And Other Goods—Will Likely Cost More

Economists have said tariffs will force many companies to increase their prices to compensate for the higher import costs. A trade war could mean U.S. consumers seeing increased costs at grocery stores, car dealers, and gas pumps, among other locations.

Yale University economists said that once implemented, tariffs could raise the overall cost of living, as measured by Personal Consumption Expenditures by 0.7%, costing households an average of $1,250 more annually.

With the Canada and Mexico tariffs paused for now, there’s less chance that your grocery bill will rise. However, toys and electronics are caught in the crosshairs of Chinese tariffs. Any price changes will likely take a couple of months to show up at the register, economists said.

“Don’t make dramatic changes in buying behaviors; don’t change everything just in anticipation of higher prices in the future,” said Patti Brennan, CFP and CEO of Key Financial, a wealth management company.

Your Job Could Be At Risk

A trade war could also increase unemployment rates, as companies must balance increased import costs with the cost of their employees.

“Companies who are purchasing these goods… if they have the choice of getting the materials versus keeping the people, they’re going to need materials [to keep production up],” Brennan said.

The Canadian Chamber of Commerce estimates that 1.4 million American jobs are tied to Canadian exports. Additionally, the U.S. Department of State estimates that American exports to Mexico support an estimated 1.1 million jobs as of 2019. Another nearly one million American jobs are tied to exports to China, estimates the American World Trade Chamber of Commerce.

These jobs, which deal with imports and exports from some of the U.S.’s biggest trading partners, could be in danger if tariffs stick. Unemployment rates in the U.S. this year could rise from the original estimate of 4.1% to as high as 4.5% due to tariffs, predicted Oxford Economics’ Ryan Sweet.

Borrowing Money Would Stay Expensive

While many consumers have hoped for the Federal Reserve to cut its influential interest rate, tariffs could hold up any relief.

Federal Reserve officials have entered “wait-and-see” mode as they watch for any economic effects of tariffs and other fiscal policy changes. At their last meeting, they held their fed funds rate, which influences borrowing costs on everything from mortgages to credit cards.

Sweet wrote that tariffs may leave Fed officials stuck between cutting interest rates to boost the economy and prevent unemployment or raising rates to slow down the economy and calm inflation.

“[Americans] need to shore up their emergency fund, get their home equity lines of credit, make sure that they have something backing them up if they don’t have it already, and wait and see,” Brennan said. “If anything, I could see that if inflation begins to tick up, the Federal Reserve would not hesitate to increase interest rates again.”