Trump's tariffs are bigger than his tax cuts for most Americans Analysis by Zachary B. Wolf, Tami Luhby, Soph Warnes, CNNSeptember 15, 2025 at 2:00 AM 0 Trucks carrying shipping containers are seen at the Port of Miami in Miami, Florida, on August 7, 2025.
- - Trump's tariffs are bigger than his tax cuts for most Americans
Analysis by Zachary B. Wolf, Tami Luhby, Soph Warnes, CNNSeptember 15, 2025 at 2:00 AM
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Trucks carrying shipping containers are seen at the Port of Miami in Miami, Florida, on August 7, 2025. - Chandan Khanna/AFP/Getty Images
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Republicans and President Donald Trump want credit for what he has called "the largest tax cut in the history of our country" for the income tax cuts in his One Big Beautiful Bill Act.
Democrats and free trade advocates have said Trump's tariff policy, which placed levies on most imported goods from around the world, is one of the largest tax hikes in history.
Both claims are debatable, but for most Americans how tariffs and tax cuts will affect their daily lives is a highly relevant question.
The answers are hard to find and nuanced. But the bottom line, according to calculations by the Yale Budget Lab, is that American households could pay $2,300 more, on average, as result of the current tariff policy, nearly three times the average roughly $800 benefit from the OBBBA's new tax provisions.
"For households as a whole, the total tax increase they'll feel from tariffs is larger than the total tax cut they'll feel from the new provisions in the Republican tax package," said John Ricco, the lab's associate director of policy analysis.
There are multiple variables that complicate things.
First, tariffs have not yet sparked inflation on the level that many economists have predicted — although it is ticking up. There's evidence that some of the impact from tariffs could be delayed, and much of the president's tariff policy has only recently kicked in. Plus, the US economy is massive and decentralized and there are many factors beyond tariffs and taxes at play.
Trump and Republicans have said the tax cuts are much larger than the tariffs, an argument that sidesteps the reality that the bulk of the tax cuts may not be noticed by many Americans. Rather than enact entirely new tax cuts, much of what the bill does is make permanent individual tax cuts that were passed as temporary policy during Trump's first term.
Plus, specific measures like a temporary reprieve for taxes on tips will only help slivers of the workforce. The tax bill also includes cuts to the social safety net like food assistance and Medicaid, with the expectation that millions of people will lose these benefits, affecting their quality of life and financial resources.
Even before those cuts, the cost burden of tariffs is expected to push hundreds of thousands of Americans into poverty next year, according to a separate Yale analysis.
Tariffs amount to a national sales tax on imported goods, although the rate of tariffs varies by country and continues to change. Their impact could likewise evolve if, as Trump promises, they kickstart a US manufacturing renaissance.
Here's the math
One detailed comparison of how tariffs and tax cuts will affect Americans comes from the Yale Budget Lab, which concluded in a recent analysis that only those highest on the income ladder will come out ahead over the next decade when tariffs are put alongside tax cuts.
The top 10% of households, those who on average are making $518,000 per year, will pay about $13,600 less in taxes, according to Yale's analysis. They'll have to spend nearly $5,450 more, on average, because of tariff-fueled price increases.
That combined effect of tariffs and tax increases will net out to an income boost of about $8,200, or 1.6%, according to Yale.
Every other income bracket will be worse off due to tariffs
Middle-income households, who on average are making between about $105,000 to $122,000, will see their average $1,200 tax cut more than offset by a $2,200 cumulative tariff price hike, in the Yale analysis.
Those who make the least will be hurt the most. The bottom 10% will see their average annual income drop by almost $2,600, or 6.6%, the lab found. They'll take an average $1,350 hit to their wallets from tariffs coupled with a roughly $1,200 hit, on average, from the "big, beautiful bill," largely because the Republican package slashed spending on the nation's safety net to pay for part of the tax breaks. These folks have an average income of just under $39,000.
Plus, while the higher cost of goods from tariffs affects every household, it will disproportionately hurt lower-income consumers because they spend a higher share of their income than the wealthy do, Ricco said.
That impact is clear from a separate report Yale issued in early September on Trump's tariff policies. It showed that while the wealthiest Americans will lose nearly $5,250 in disposable income in 2027 because of higher prices, that only amounts to only 1% of their income.
By contrast, tariffs will cut more than $1,300 out of the income of the bottom 10%, but that accounts for 3.5% of their disposable income, Yale found.
House of Representatives Speaker Mike Johnson claps as President Donald Trump presents the sweeping spending and tax legislation, known as the "One Big Beautiful Bill Act," after Trump signed it, at the White House on July 4, 2025. - Leah Millis/ReutersMany Americans may not feel the tax cuts
The real-world effect of the new tax and spending cut bill will be further muted by the fact that most of the tax cuts are extensions of tax cuts that would have expired rather than new tax cuts.
Looking only at the new measures in the package, including the temporary elimination of taxes on some tips and overtime, the enhanced deduction for senior citizens and the beefed-up child tax credit, Americans will get an $800 break on their taxes in coming years, according to Yale. If extending the expiring cuts is added in, the average tax cut rises to $3,000.
Different research groups and think tanks use different calculations to gauge tax cuts compared to tariffs, but their bottom-line assessments are the same.
"Tax cuts are higher for higher-income people, whereas tariffs have the opposite effects; they are much more evenly distributed," said Joseph Rosenberg, a senior fellow at the Urban-Brookings Tax Policy Center. That means they will hit lower income Americans harder.
But on national debt, a wash
While the tariffs, as currently constructed, will outweigh the tax cuts for most Americans, it's also important to look at how the two contrasting tax policies will affect the country's bottom line.
The beefed-up tariffs are projected to lower the federal deficit by $3.3 trillion over the 2025 to 2035 period and to reduce interest costs by an additional roughly $700 billion, for a total impact of $4 trillion, according to the Congressional Budget Office's latest estimate, which looked at tariffs imposed as of August 19.
The GOP tax and spending cuts package is expected to increase the federal debt by an estimated $4.1 trillion or so between 2025 and 2034, more than Trump's tariffs are forecast to bring in. It is expected to increase the deficit by $3.4 trillion and add roughly $718 billion in interest costs.
Less balance in the system
Adam Michel, director of tax policy studies at the libertarian-leaning CATO Institute, said even if the tariffs end up canceling out the impacts of the tax cuts, the effects of the two policies could make the country more unequal.
The tax cuts are "riddled with special interest carveouts that treat similarly situated Americans with vastly different tax systems." Consider the increased state and local tax deductions for many East Coast homeowners, new deductions for oil and gas companies, whalers in Alaska and rum producers in Louisiana, among others.
The same is true of tariffs, he said, which will hit some industries harder than others.
"Together, these two changes mean we are moving toward a far more unequal and unstable fiscal system that trades durable reform for lumpy, distortionary breaks and levies that undermine long-run stability and fairness," he said.
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