5 ways to tariff-proof your finances
In recent months, news of the Trump administration's aggressive and ever-evolving tariff policy has been dominating headlines. And Americans are concerned about how higher tariffs will impact their ability to afford daily essentials.
A baseline 10% tariff went into effect on April 5 for all affected imports into the U.S. In response, China raised its duties on imports of U.S. goods to 125% (from 84%), and tariffs on Chinese imports have skyrocketed to "a 125% reciprocal tariff, a 20% tariff to address the fentanyl crisis, and Section 301 tariffs on specific goods, between 7.5% and 100%."
These tariffs increase the cost for businesses to bring foreign products into the country. So, to maintain profit margins, companies often pass those costs along to consumers in the form of higher prices. There's no telling how much higher these tariffs will go or how long they'll be in place, but there are steps you can take to reduce the impact these policies have on your wallet.
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In short, tariffs are taxes imposed by the government on imported goods. They're usually charged as a percentage of the item's value and are paid by the importer when the product enters the country.
According to recent estimates by the Center for American Progress, the typical American household can now expect to pay an average of $4,600 annually because of Trump's tariffs. A different analysis by the Budget Lab at Yale estimated that the annualized cost of Trump's new tariff scheme for the typical American family is $4,700.
Read more: Trump's tariffs: What they mean for the economy and your wallet
Tariffs can be a frightening prospect for consumers because there's no way to predict how high tariffs will get and how deeply they will impact your personal finances. However, there are still steps you can take to prepare yourself and your wallet for the potential impacts.
When prices rise, it may be harder to justify setting aside cash in a savings account. However, higher costs make it more important than ever to ensure you have a solid financial safety net.
'Keep building that emergency fund,' said Matt Schulz, chief consumer finance analyst for LendingTree. Most experts recommend saving up at least six months' worth of expenses. This financial cushion can help you absorb sudden increases in the cost of essentials as well as avoid going into debt if your monthly expenses outpace your budget or if an unexpected bill hits during a period of higher inflation.
Now is a good time to reevaluate your budget and see where you can cut back, especially on nonessential purchases (aka discretionary spending). For example, you can freeze memberships you aren't using, downgrade subscriptions to versions with ads, or even try a no-spend challenge.
Reducing your discretionary spending — even if it's temporarily — can open up more cash flow to put toward essential bills, savings, and debt repayment.
Read more: Your complete guide to budgeting for 2025
With prices on the rise, it could make sense to adjust your debt repayment strategy.
'Money you have to put toward paying down credit card debt or other high-interest debt is money that can't go toward putting food on the table, building an emergency fund, or reaching other financial goals,' Schulz said. 'It's also money that can't be used to offset rising prices.'
In other words, aggressively paying down your debts may not be the best move right now, depending on how much extra money you have in your budget. Instead, Schultz suggested using a 0% balance transfer credit card or low-interest personal loan to consolidate those debts and decrease the amount of interest you're paying. Again, this can help improve your cash flow if money is tight.
When tariffs are driving prices up, being intentional about what, where, and how you buy is key.
For example, you may consider stocking up on nonperishables and household staples before prices rise further. If you have a large family, it could make sense to join a warehouse club (such as Costco or Sam's Club) to save on the per-unit cost of frequently used items in your home.
Additionally, avoid spending on products that are impacted more heavily by higher tariffs, such as electronics, toys, and clothing. You can also use cash-back apps such as Rakuten, Honey, or Ibotta to earn back money on essentials.
If you're struggling to manage your finances and aren't sure what your priorities should be, it can help to consult a financial planner. They can help you come up with a tailored plan to pay off debt, meet your savings goals, improve the return on your investments, and create a budget with these goals in mind.
'Regardless of whether tariffs are implemented, your goals are still your goals,' Schulz said. For instance, you still need to invest in your retirement. You may also be saving money to buy a home, pay for your kid's college education, or pay for a wedding. 'These things still matter, so don't let uncertainty around tariffs keep you from focusing on them,' he said.
Read more: What is a financial advisor, and what do they do?
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