President Trump’s apparent consideration of a 20 percent import tax has created a lot of uncertainty.

The proposed import tax, also called a “border adjustment tax,” is part of a broader plan by some House Republicans to overhaul corporate taxes. Taxing all imports could affect the price of almost everything Americans buy, from autos and smartphones to food and clothing.

But before going into how this might hit your pocketbook, it’s important to note that there are a lot of unknowns. Trump, for instance, has talked mostly about taxing goods from Mexico to help pay for the proposed wall between the two countries.

On Thursday, he appeared to favor the broader import tax, also called a tariff, when he met with congressional Republicans in Philadelphia. Even then, aides quickly said the 20 percent tax was only “one idea” being considered, the New York Times reported.

Still, assuming some kind of import tax is ultimately enacted, what could that mean for you and your family? Here’s what some economists and other experts are telling Consumer Reports.

Widespread Impact

Any kind of import tax is likely to trigger higher prices for American consumers, though experts disagree on how much and for how long.  

“It’s hard to say exactly how much prices would adjust,” says Brian Schaitkin, senior economist at the Conference Board, an independent business research organization. “But the trade environment would be disrupted, hurting everyone from retailers to those in the food industry to those making more complex, manufactured goods like cars.”  

How quickly prices would rise also depends on what’s being imported, says Mark Perry, a professor of finance and business economics at the School of Management at the University of Michigan, Flint.

Consumers could see an immediate impact on products like televisions, vegetables, clothing, and shoes.

“Perishables would feel the full impact of the tax immediately,” says Ethan Harris, global economist for Bank of America. “For other products with long shelf life where there is plenty of inventory, the impact would be slower.” 


Prices for cars using foreign-made parts might not move higher for months or as long as a year, the Conference Board’s Schaitkin says. That’s because those parts likely would have been purchased before the new tax took effect.

A One-Time Shock?

It’s unclear how long any price increases would last, though.  

“A tariff would create a one-time spike in inflation, but over time, prices would adjust,” says Bank of America’s Harris. “So for the first year, there would be significant inflation pickup. But from there, the lasting impact is small. It would be a one-time shock to consumers’ spending power.”

It’s also worth noting that a 20 percent import tax doesn’t mean prices would go up that much. For one thing, the tariff would likely push up the dollar’s value against other currencies, which cuts the cost of imports. Some economists think the dollar’s rise would actually offset the import tax, so that there would be little or no impact on American consumers.

There are also the mechanics of how tariffs actually work. When a product is imported into the U.S., the tax is slapped on the wholesale price, which is what a retailer or manufacturer pays, not the retail price, which is what consumers pay.

“It waters down the impact of prices,” Harris explains. “So a 20 percent import tax would result in single-digit percentage increases of around 5 percent." Still, he adds, that is not inconsequential. "There is sticker shock.”

Other Potential Issues

Tariffs also have many consequences, some of which may not always be intended.

For instance, a significant rise in inflation could push the Federal Reserve to raise interest rates more quickly.

Consumers would feel that effect immediately in higher interest rates on home and auto loans, credit card rates, and other consumer debt, Schaitkin notes. On the positive side, savers could benefit from higher interest rates on savings accounts and certificates of deposit.

The Fed has already said it expects to make three such interest rate adjustments this year, but has not indicated when or by how much.

Tariffs can also have a negative impact on Americans in some unexpected ways, some experts say.

Michigan’s Perry, who also is a visiting scholar at the American Enterprise Institute in Washington, D.C., and an strong opponent of the tax, pointed to 2009, when the U.S. imposed a tariff on Chinese tires.

“It was a disaster,” he says. “It raised prices for consumers, it cost us $900,000 per job saved, it led to a loss of three retail jobs for every factory job saved.”  

What’s more, China retaliated with tariffs on U.S. chicken, causing a $1 billion loss of sales for U.S. chicken producers, he adds.