Inflation is Crushing Living Standards
Over the past year and a half, we have witnessed the levying of tariffs at a level not seen in modern times. Now, without being overly political, this should be common sense for anyone with an elementary comprehension of economics. If you levy taxes on imports, those additional costs will eventually filter through the system because businesses will not simply absorb the higher cost of doing business. After watching the 2026 midterms unfold, with Florida’s outgoing Governor Ron DeSantis describing the results as “close to an extinction-level event” for Republicans, I could not shake the thought of what rising petrol prices are doing to consumers, and of tariffs finally finding their destructive tentacles into the bank accounts of everyday people.
But it gets even more complicated, well it really should not, but for the sake of this article, I will use the term complicated. If Bubbly Shells imports leather for the manufacturing of various goods and now finds itself with an additional 10%, 25% or even 100% attached to its business expenses, precisely how do you suppose Bubbly Shells will handle the excess cost? It is also important to keep in mind that not only will the cost of leather appreciate, but so will the products that are made from leather. And it doesn’t stop there.
The economy is interconnected, and a price increase on one product will typically ripple outward to goods and services that seem entirely unrelated. So, what precisely does this mean for the middle class, or anyone else for that matter? It means that tariffs are taxes on consumers, and while many of the increases take some time to filter through the economy, the evidence points to their inevitability.
The question that tends to get lost in the noise is who, precisely, writes the cheque at the end of it all. The administration has argued that foreign exporters bear the cost, and it is an appealing notion because it would mean the burden falls on someone else entirely. The evidence has not been kind to it. The Kiel Institute for the World Economy found that foreign exporters absorbed only around four per cent of the cost of the 2025 tariffs, leaving the remaining ninety-six per cent with Americans. Other analyses, including work from the New York Fed and the Congressional Budget Office, put the American share somewhere between roughly 86 and 96 per cent, so the precise figure is debated while the direction of travel is not.
What makes this so awkward for the middle class is that they sit in a rather unfortunate position within the system. Households in the middle spend a large proportion of their income on physical goods, such as clothing, appliances, furniture, vehicles and food, which are the very categories most exposed to imported inputs. A wealthier household spends a smaller share of its income on such things, and a lower-income household may qualify for support that cushions the blow, whereas the middle tends to receive neither the insulation of wealth nor the relief of assistance. The Tax Foundation noted that in 2026 the tariffs were expected to reduce after-tax incomes for all income groups, with the top 1% seeing a smaller reduction than other brackets.
Then there are the numbers themselves, which vary depending on who is counting and what they choose to count. Before the Supreme Court ruling, the Tax Foundation estimated that the tariffs cost the average American household around $1,000 in 2025, with a projected $1,300 for 2026 had they remained in place, while Yale’s Budget Lab put the figure at about $1,400 a year for the median household. I would encourage some scepticism toward any single headline number, and the fact-checkers at Poynter made a similar point, observing that several widely quoted figures rest on averages rather than medians, which can misrepresent the cost to the typical family. The legal landscape has also shifted, since the Supreme Court struck down the emergency-powers tariffs and the administration then turned to other measures, with the Tax Foundation estimating that the tariffs remaining after the ruling would cost around $400 per household in 2026. Policy has continued to move since, which means the cost depends heavily on which tariffs survive at any given moment, and that is itself a source of uncertainty for any household trying to plan.
And uncertainty is its own kind of cost. Returning to Bubbly Shells, the owner is not only weighing a higher price for leather today but trying to guess whether that price will be higher, lower or unchanged by the time the next order arrives. A business that cannot forecast its input costs delays hiring, postpones investment and builds a cautious margin into every price it sets, and that caution is passed along to the customer just as surely as the tariff itself. This is the connecting tissue I mentioned earlier, because a tariff on leather does not stay in the leather aisle. It reaches the freight company that moves the goods, the retailer that stocks them, and eventually the family comparing prices on a Saturday afternoon and deciding, without much fanfare, that something will have to wait.
There is also the matter of what households were already carrying. The Tax Foundation found that, under the tariffs as they then stood, middle-income households saw between 70 and 95 per cent of the benefit of recent tax cuts erased. A tax cut and a tariff arrive through entirely different doors, one on a pay slip and the other at the till, which makes it easy to credit the first and overlook the second. Yet the household budget does not distinguish between them, and a dollar returned in January and a dollar withdrawn through higher prices in March simply net out.
Now, in fairness, the case for tariffs deserves a hearing and should not be dismissed out of hand. The administration has framed them as a way to raise government revenue and to bolster American manufacturing jobs. The revenue is not trivial, with the Tax Foundation projecting something in the region of $2 trillion between 2026 and 2035 under the tariffs in place at the start of this year, and there are legitimate arguments for protecting industries considered vital to national security, such as steel, semiconductors and pharmaceuticals. Supporters would also say that short-term pain can be a reasonable price for rebuilding domestic capacity. The difficulty, as I see it, is that the same analysts who acknowledge the revenue also find that the overall economy ends up smaller, and the Budget Lab’s modelling suggests that modest gains in manufacturing output are outweighed by losses elsewhere. Whether one finds that trade-off acceptable is a values question, but what the cost is, and who pays it, is a matter of evidence.
So where does that leave the household? The sensible response, I would suggest, is to treat tariffs as what they functionally are, a consumption tax that rises and falls with policy, and to build that into one’s thinking about budgets and big purchases. It is worth watching the categories most exposed, such as vehicles, appliances and building materials, and recognising that a price rise which looks like ordinary inflation may have a trade-policy fingerprint on it. It also helps to keep a little more margin than usual in the monthly budget, because costs that arrive gradually are the ones that tend to go unnoticed until they have become permanent.
The middle class has always been the engine of consumption in the American economy, which is precisely why it is also the most exposed when the price of consumption rises. A tax that looks, from a distance, as though it falls on foreign producers turns out on closer inspection to land on the kitchen table, and that, rather than any political allegiance, is the point worth sitting with.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Consult with a qualified 1 financial advisor or tax professional before making any decisions about your investments or retirement accounts
Jay Sadio, MBA
