Economic inequality in the United States has been a fact of life for decades.
And the tariffs that President-elect Donald Trump is proposing will fall squarely on the shoulders of U.S. households, particularly those with lower incomes.
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The distribution of spending by income levels shows that the economy is K-shaped, where one side of the distribution accounts for a large majority of income, spending and savings.
The upper three income deciles alone account for 51.24% of all American spending. Those deciles—the upper spur of the K—spent approximately $95,606, $119,303 and $180,758, respectively, in 2023, the last year of available data.
Broadening that out a bit to include middle-class households with incomes of $80,054 and above shows that the upper half of the distribution accounts for more than 70% of all spending.
Tariffs, or import taxes, are inherently regressive, as lower-income households spend a greater proportion of their earnings on day-to-day expenses.
Those with incomes in the lower half of the distribution, which accounts for only 29.3% of spending, are still having problems adjusting to the pandemic-induced price shock. For this reason, the increase in tariffs appears particularly ill-timed.
As those import taxes are passed along to American households, the result will be an inequitable burden of adjustment.
