5 Ways Tariffs Could Affect the Upper-Middle Class
Be Aware:
Find Out:
Watch out for these five ways tariffs could affect the upper middle class — and plan accordingly.
Inflation has remained more muted than expected, as importers rushed to stockpile inventories in the first quarter of 2025. But those inventories are already dwindling, and the third quarter could see inflation heat up again.
'Tariffs will impact the upper-middle class's buying power as both core material and discretionary materials increase in costs,' explains Babak Hafezi, founder of Hafezi Capital and professor of international business at American University. 'Items like electronics, clothing, household products and cars will be impacted.'
Read More:
That loss of purchasing power will prevent the upper-middle class from buying the brands and small luxuries they enjoy. In some cases, it will become harder or even impossible to find some imported goods.
That could mean certain wines doubling in price, or no longer imported at all. Or French cheeses, or perfumes, or fast fashion lines that are no longer affordable enough to justify their low-build quality.
The June Blue Chip Economic Indicators survey by Wolters Kluwer shows economists projecting slower growth in both 2025 and 2026.
As recently as February, economists projected GDP growth of 2.2% for 2025 and 2.0% for 2026. By June, the consensus forecast for both dropped to an anemic 1.4%.
Recession risk also remains elevated. The survey of economists forecasts a 41% chance of recession in the US over the next 12 months.
Slow or negative GDP growth adds to the risk of job loss for the upper-middle class just like everyone else. Or, more likely, the risk of reduced income or no rise in income — even as inflation drives up costs. Again, that could leave many in the upper-middle class with less purchasing power.
Stagnating economic growth certainly doesn't do investment portfolios any favors.
From 2015 to 2024, the S&P 500 has delivered an average annual return of 14.1%, according to data from The Motley Fool. The next decade may not prove so fruitful for investors.
'Upper-middle-class investors hold ETFs and mutual funds packed with global manufacturers and importers,' notes Eric Croak, the certified financial planner (CFP) behind Croak Capital. 'Tariffs squeeze margins on those companies. Dividends shrink, share prices dip, future earnings soften. These investors could find themselves stuck between cashflow drag and asset underperformance.'
Many upper-middle class families want to cover college costs for their children. Expect that to get harder, between tuition, books and housing inflation, combined with weaker income and investment growth.
But higher education also stands to become more expensive due to less subsidization by foreign students.
'Many colleges and universities depend on foreign students who pay full tuition as a means to subsidize other students' grants and scholarships,' added Hafezi. 'Less money for scholarships and grants, combined with higher costs and inflation, will drive up costs for American families.'
More From GOBankingRates
3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025
8 Common Mistakes Retirees Make With Their Social Security Checks
How Much Money Is Needed To Be Considered Middle Class in Your State?
This article originally appeared on GOBankingRates.com: 5 Ways Tariffs Could Affect the Upper-Middle Class
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Los Angeles Times
2 minutes ago
- Los Angeles Times
Trump set to make final call on China tariff truce extension
US President Donald Trump is set to make the final call on maintaining a tariff truce with China before it expires in two weeks, an extension that would mark a continued stabilization in ties between the world's two biggest economies. The two sides agreed to extend their tariff truce, Chinese trade negotiator Li Chenggang told reporters in Stockholm without providing further details. Treasury Secretary Scott Bessent, who led the US delegation with Trade Representative Jamieson Greer, later said 'our Chinese counterparts have jumped the gun a little.' Asked on CNBC whether he'd recommend an extension of the pause, Bessent said he'd give Trump the facts, 'then he'll decide.' There's still 'a couple of technical details to work out,' Bessent told reporters Tuesday after two days of meetings with officials from Beijing led by Vice Premier He Lifeng. The Stockholm negotiations marked the third round of US-China trade talks in less than three months. They wrapped up ahead of an Aug. 12 deadline to resolve differences during a 90-day suspension of sky-high tariffs that had threatened to cut off bilateral trade. Adding an extra 90 days is one option, Bessent said. 'While there is disappointment that nothing material was agreed, the mood seems to be constructive and optimistic about future potential deals,' Kelvin Lam, senior China economist at Pantheon Macroeconomics in London, said in an initial assessment. Asian shares were mixed in early trade on Wednesday. The S&P 500 snapped a six-day rally. A 90-day extension would clear the path for Trump to visit China to meet with President Xi Jinping in late October, around the time of an international meeting in South Korea that the US leader is likely to attend. Speaking to reporters on Air Force One, Trump said he may meet with Xi before the end of the year. Trump also said he heard from Bessent that the talks with China went well. Trump-Xi Summit? Both sides have been taking steps to turn down the temperature and reduce flashpoints recently, with Chinese exports of rare earth magnets starting to recover in June and the US saying it would approve shipments of a semiconductor used for artificial intelligence which it had blocked. This week, the US also declined to allow Taiwanese President Lai Ching-te to transit through the US, removing a potential thorn in ties with the mainland, which claims Taiwan as its own territory. 'All of these moves are setting the stage for what I predict will be a summit between Trump and Xi before Thanksgiving,' Harvard professor Graham Allison said on X. Allison last month met with China's foreign minister and the party secretary of Shanghai, who is a member of the Politburo. The Stockholm round came on the heels of the Trump administration reaching preliminary tariff deals with Japan and the European Union. Bessent said his Chinese counterparts were in 'more of a mood for a wide-ranging discussion.' The US treasury chief told CNBC that the Chinese side came to talks with a delegation of 75 people, versus the 15-strong team fielded by Washington. 'We start out in a very large room, probably 12 or 15 on each side of the table,' he said. The 'real work gets' done when delegates 'break down into smaller groups of two-on-two,' he added. Unlike at the previous talks in London, the US team this time around didn't include Commerce Secretary Howard Lutnick, who oversees Washington's export control regime. With the outlook for tariffs looking less dire than in April, the International Monetary Fund this week raised its forecasts for global growth this year. The truce has also helped China's economy, with the IMF boosting its 2025 outlook for the country to 4.8%, noting the lower levies and stronger-than-expected activity in the first half. At issue in the ongoing dialogue is how the two countries seek to maintain a stable trading relationship while applying barriers like tariffs and export controls to limit each other's progress in critical sectors ranging from battery technology and defense to semiconductors. Greer said the US wants assurances that critical materials like magnets keep flowing so the two sides can focus on other priorities. 'We don't ever want to talk about magnets again,' he said. Greer said the resumption of China's rare earths exports is Beijing's biggest concession so far. Asked if the US made any commitments to China on its pending 232 investigations, Greer said China asked for status updates on them, but stressed that the eventual duties would be applied globally and not have any exemptions for particular countries. Reducing the 20% tariffs that Trump imposed over US claims that Chinese companies supply chemicals used to make the illegal drug fentanyl is also a high priority for Beijing, Eurasia Group analysts wrote in a note last week. In the background of the latest trade talks between Washington and Beijing is the race by several economies to sign tariff deals with Trump before Aug. 1, when he's threatening to impose so-called reciprocal import taxes on the US's major trading partners. Leonard , Tam and Duxbury write for Bloomberg.
Yahoo
17 minutes ago
- Yahoo
Ether Volatility Spikes on Rally as Bitcoin Edges Back Toward Record Highs
Crypto markets began Monday on a high note, with ether (ETH) up more than 21% over the past seven days to $4,300 and bitcoin (BTC) climbing 3% to within touching distance of record highs. BTC led gains among majors in the past 24 hours, with Solana's SOL (SOL), XRP (XRP), dogecoin (DOGE), and BNB Chain's BNB (BNB) rising nearly 1%, but reversing all profit-taking from the weekend to start the week in green. The S&P 500 recovered from last week's post-payrolls dip to near all-time highs, while the Nasdaq set a new record on strong earnings, shrugging off political noise and fresh U.S. import taxes. ETH has outperformed sharply against this macro backdrop, driving a divergence in short-dated implied volatility between majors. 'BTC IV remains near all-time lows while ETH has jumped materially,' said Augustine Fan, Head of Insights at SignalPlus, told CoinDesk in a Monday note. 'Term structure on ETH is inverted, with long-dated vol expected to settle near 70%, while BTC's curve is the opposite — short-dated vol heavily compressed with spot stuck around $120K. A month ago, markets priced just a 5% chance of ETH hitting $4.5K in August; spot has far outpaced those expectations," he added. ETH's strength has been underpinned by pro-crypto regulatory signals and heavy inflows into ETFs, with traders betting on a retest of its all-time high. Bitcoin, which has been slower to respond, is now showing signs of catching up, suggesting that institutions are less hesitant to add exposure across the board. 'Given the strong rally over the weekend, we expect prices for both BTC and ETH to continue to rise, barring any tariff shocks,' said Jeff Mei, COO at BTSE, told CoinDesk in a Telegram message.'Traders should also watch developments around the next Fed chair nomination, plus this week's CPI and PPI releases, which could shape rate-cut expectations,' Mei added. Erreur lors de la récupération des données Connectez-vous pour accéder à votre portefeuille Erreur lors de la récupération des données Erreur lors de la récupération des données Erreur lors de la récupération des données Erreur lors de la récupération des données
CNBC
32 minutes ago
- CNBC
Why the market is shrugging off Nvidia's 15% fee on AI chip sales to China
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Market update: Stocks are little changed to start the week. There was an attempt at a rally shortly before noon, but it ultimately fizzled out. Investors may be waiting for the results of the July consumer price index report, which economics expect will show a slight pickup in inflation from June. Those numbers are due on Tuesday. Compared to recent weeks, earnings won't be as much of a catalyst for the markets with only a small handful of stocks in the S & P 500 scheduled to report. Nvidia deal : The market doesn't mind that Club name Nvidia and peer AMD will have to give the United States a 15% share of all AI chip sales to China. The arrangement, confirmed by President Donald Trump on Monday, is part of a broader deal announced last month that restored the companies' ability to sell AI chips to Chinese customers. That ability had been revoked in April, when the Trump administration tightened Biden-era export controls that had forced Nvidia and AMD to design throttled-back versions of their top-end AI chips for the Chinese market. This 15% payment to the government in order to be able to sell to China again is a first; we haven't seen a deal like this before. But it's not negative as far as the stock is concerned — shares were little changed on Monday. The bigger prize is maintaining the ability to sell to China, a market that Nvidia CEO Jensen Huang has estimated could be worth $50 billion in the next few years. Bernstein analyst Stacy Rasgon was on CNBC on Monday afternoon and shared this thinking on this deal. "From Nvidia's standpoint and from AMD's standpoint, I get it, like 85 cents is better than anything, and it's important for them to be able to sell into China because otherwise you're just handing that market over to China and to the local players. That market is not going away. We need to be able to compete there, so that's good," Rasgon said on "The Exchange." He added, "I think that should happen on their own merits." To size up the potential impact of this payment, Nvidia was selling about $8 billion worth of chips to China a quarter prior to the previous export restriction. A 15% haircut would equate to a little more than $1 billion per quarter, or about $5 billion per year. That's a large number for most companies, but not for Nvidia: analysts estimate the company will do about $200 billion in revenue over its ongoing fiscal year 2026 and $255 billion in fiscal year 2027. Up next: There are no major earnings reports on our radar after the closing bell on Monday and before the opening bell on Tuesday. But some notable names scheduled to report are Cardinal Health , Oklo , AST SpaceMobile , and Circle Internet Group . On the data side, on Tuesday we'll see the NFIB small business optimism index and the July consumer price index report. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
