Examining Tariffs Through A Latino Lens

Forbes

30-04-2025

Prices for Colombian coffee are increasing.
The impact of President Trump's tariffs on Latinos will likely affect not only that community but also produce a domino effect of negative consequences for the overall economy.
Although most consumers and workers will suffer from the tariffs imposed by the Trump administration, Latinos will likely experience the most significant economic impact. The nonpartisan policy research group The Budget Lab at Yale calls the Trump tariffs a regressive policy. Whenever a regressive tax is imposed, those with the lowest incomes pay the most and face the most significant negative economic consequences. In 2017, the Heritage Foundation noted, 'Tariffs are just taxes on Americans by another name,' adding, 'Cutting tariffs could be the biggest tax cut low-income families will ever see.'
Per capita income is a barometer that measures the ability to afford essential goods and services. According to the U.S. Census Bureau's most recent American Community Survey, Latinos have the lowest per capita income among racial and ethnic groups. Their per capita income is $27,653, 9% lower than that of Blacks, 49% lower than that of Asians, and 44% lower than that of whites. This means that when prices of goods and services increase due to tariffs, Latinos will be the least able to purchase even the most essential goods and services.
According to the U.S. Bureau of Labor Statistics, for the first quarter of 2025, Latinos had the lowest median weekly earnings among racial and ethnic groups. At $929, Latinos' median weekly earnings are 41% lower than Asians, 7% lower than Blacks, 24% lower than whites, and 22% lower than the overall population.
According to the nonpartisan policy institute, the Center for American Progress, in the United States, Latinos represent the demographic group with the highest percentage of workers classified as low-wage. The Latin Times points out that 21% of white workers fall into the low-wage category, compared to 33% of Latinos. Tipped employees are one example of low-wage workers, and among them, Latinos are overrepresented at 24% while accounting for 17% of the country's overall workforce.
A Latina who works for tips and declined to give her name to protect her privacy, said, 'When shoes and clothes and even food costs more, people still eat out, but they tip less. That means I make less money, and then I cannot buy what I need because I do not have the money.'
A Latina small business owner in Minnesota worries about the imposition of tariffs.
Latino entrepreneurs play a significant role in shaping and expanding the U.S. economy, as stated in the 2024 State of Latino Entrepreneurship report from Stanford University. The report highlights the fact that Latino-owned businesses represent the fastest-growing and most dynamic segment in the entrepreneurial landscape, and while Latino-owned businesses are more likely than white-owned businesses to provide employer-sponsored benefits and demonstrate a larger commitment to upward mobility for their workers, the Latino entrepreneurs face funding challenges. Despite those funding challenges, the number of Latino-owned businesses and the revenue they generate have consistently increased.
The U.S. Small Business Administration defines small businesses as those with fewer than 499 employees. Currently, 99% of U.S. businesses are defined as small enterprises and are critical to the U.S. economic landscape. According to McKinsey & Company, 'Latino owners of {small} businesses are the most entrepreneurial ethnic group in the economy.'
At the same time, many Latino-owned businesses operate with razor-thin profit margins and are disproportionately concentrated in industries such as construction, retail, and hospitality. These industries are among the most susceptible to price fluctuations. Tariffs cause significant and often unpredictable price changes, leading to substantial challenges for many Latino business owners.
One Latino business owner in Chicago, who did not give his name to protect his privacy, employs about 15 people. He vividly described what the tariffs are doing to his business. 'I have a number of clients who wanted construction work done this spring. I provided them with bids last December and January. They signed the contract and provided a third of the total cost as a down payment, understanding that work would be done in the late spring of this year. I have begun to buy the materials for the projects, and my costs have increased by 15% since I provided the bids. I cannot pass those costs onto the client, but I still have to pay my workers and bills. We will likely lose a lot of money this year. But we also cannot raise our prices too much because the cost of everything is high for our clients, and if our prices are too high, they will not use our services. Then I will be forced to put people out of work. These tariffs are damaging to my business and my family's future.'
Latina/o laborers are waiting for an opportunity to work.
Farm, retail, and construction industries will see a swift and significant impact from the tariffs. The workers in those industries will likely face a cutback in their hours and even job loss. Latinos disproportionately fill those jobs. For example, according to the 2023 American Community Survey from the U.S. Census Bureau, Latinos account for 40% of workers in crop production and nearly 1/3 of construction and retail trade workers. Many Latino workers will face reduced hours or job loss when those industries experience an economic downturn. That, in turn, lowers their ability to make discretionary consumer purchases, save, make major purchases such as a home, car, appliances, or even pay for essential goods and services. That change in consumer behavior undoubtedly will have negative consequences for the country's overall economic growth and stability.
A recent study by the Latino Donor Collaborative documents that between 2021 and 2022, U.S. Latino purchasing power rose by $338 billion to $3.78 trillion. This increase is 2.5 times faster than for the rest of the economy. According to that report, 'U.S. Latinos purchased $2.25 trillion of final goods and services in 2022. This represented 2.72% real growth for U.S. Latinos compared to 1.99% real growth nationwide. U.S. Latino imports (the share of goods produced abroad purchased by U.S. Latino consumers) increased by 9.51% to $509 billion.'
When Latinos face a reduction in wages, job loss, and ever-increasing consumer prices due to tariffs, their ability and willingness to make consumer purchases will be dramatically reduced. When that happens, profits and the demand for labor will decline. That decline will have a ripple effect throughout the economy. Recovery from that impact is likely to take years, even decades. The impact of Latinos reducing their expenditures will affect every corner of the American economy and have a measurable and adverse effect on overall economic growth.
The significant economic challenges that Latinos face due to tariffs include an inability to buy goods and services, maintain a profitable small business, and a reduction or loss of wages. These challenges will impact their ability to save and accumulate wealth. How much of an impact on wealth accumulation is an open question, but any roadblocks Latinos face in accumulating wealth will likely result in widening, not narrowing, the wealth gap. This will affect the ability of Latinos to get ahead and eventually pass on wealth to younger generations, which for many is a necessary condition for continuing wealth accumulation across generations.
Policymakers must address the negative economic impacts of the Trump tariffs on all workers and consumers, particularly the low-wage-earning population. The negative financial consequences associated with tariffs will likely persist far longer than the tariffs themselves. In the case of Latinos, these adverse effects are expected to impact current and future generations. Additionally, given the significance of Latino contributions to population and economic growth in the U.S., this will likely result in long-lasting adverse effects on the overall economy. Policymakers must ensure that any potential short-term economic leverage gained from imposing tariffs does not lead to long-term detrimental economic outcomes for Latinos or any other demographic group, thereby compromising whatever long-term economic benefits may accrue to the country.