A prominent economic think tank’s warning that President Donald Trump’s plans to impose tariffs on Mexico, Canada, and China could land American consumers with bills costing an extra $1,200 a year has been dismissed as “alarmist” by his treasury secretary.
The analysis by the Petersen Institute for International Economics suggests U.S. households would pay a heavy price for the first wave of tariffs due to be enforced starting at midnight on Monday.
“This past weekend, President Donald Trump announced the largest tax increase in at least a generation (since 1993 or before), with the imposition of 25 percent tariffs on most goods from Canada and Mexico (aside from Canadian energy, which faces a 10 percent tariff), alongside a 10 percent increase in tariffs on goods from China. The direct cost of these actions to the typical, or median, US household would be a tax increase of more than $1,200 a year,” the institute said on its website.
It added that future waves of Trump tariffs and subsequent retaliation from foreign governments would “increase these substantial consumer costs alongside the other economic harms of tariffs: reduced economic growth, a shrinking export sector, and supply chain disruption.”
“While Trump ran for president on a platform of lowering taxes, most Americans would see a net tax increase from his agenda so far,” the think tank said, adding: “Only households in the top fifth of the income distribution would enjoy a net gain from the combined effects of the two tax changes; those in the bottom 60 percent of the income distribution would end up significantly worse off.”
Appearing on CBS’ Face the Nation with Margaret Brennan on Sunday, Treasury Secretary Scott Bessent defended the tariffs and hit back at the Petersen Institute’s findings.
“I respect my friends at the Peterson Institute,” he said, but added: “I think they’re a bit alarmist. I think a lot of their supporters are anti-tariffs, so they take an anti-tariff position.
“And look,” he continued, “we have the experience of President Trump’s first term, where the tariffs did not affect prices. And it’s a holistic approach, that there will be tariffs, there will be cuts in regulation, there will be cheaper energy.
“So I would expect that very quickly we will be down to the Fed’s 2 percent target. So I’m expecting inflation to continue dropping over the year.”
“OK,” Brennan said. “So when you say the Peterson Institute is too alarmist, with $1,200 a year on the average household, what’s the cost of the household? You think it’s zero?”
“Well, we don’t know yet, because it’s path dependent,” replied the treasury chief. “But what I can tell you is that I’m not worried about China. China will pay for the China tariffs, because their business model is exporting their way out of this inflation. They are the most imbalanced, unbalanced economy in modern times, and the idea that because of a tariff that they would lower their production is wrong. They are going to continue flooding the market. They will eat this price decrease. They will eat any tariffs that go on.”
