5 Things the Middle Class Won't Be Able To Afford After 4 Years of Tariffs
The Trump administration is implementing tariffs on virtually every country from which the United States imports items. This shift means consumers will be spending a lot more money on everyday goods. By the end of Trump's term, many things could become unaffordable to the middle class.
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It will be helpful for the middle class to understand what's coming, so they can better prepare and adjust for it. To that end, GOBankingRates interviewed a few experts for insight.
There's a reason this one might not kick in immediately. Appliances aren't items people need to buy every day, every month or even every year. By the time Trump's term ends, the middle class may realize that appliances have simply become unaffordable.
'Appliances like refrigerators, washers and dryers could jump in price,' said Chris Heerlein, CEO of REAP Financial. 'Many parts are imported, so even if the final product is assembled in the U.S., tariffs on components raise the total cost.'
So, while the middle class may not feel the immediate impact, and indeed they may still be able to buy their next washer, dryer or refrigerator in just a few years, they will no longer be 'affordable' items.
The middle class will now have to save up, pull money out of investments, or buy used. That's not something they're used to, and we may see a backlash as a result.
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Electronics are a lot like appliances. Again, they're often not an absolute necessity. They're not daily items. Most people can function with their smartphones or laptops for several years.
And because most electronics come from outside the U.S., the financial hit will be a big one on these already high-priced items.
'Electronics like smartphones and laptops are also at risk. These aren't luxury items anymore; they're tools for work and school,' Heerlein said. 'I've worked with families who had to delay school tech upgrades because the cost pushed them outside of what they could pay upfront. If tariffs continue, these kinds of purchases will move from essential to unaffordable for many middle-class households.'
If they're already unaffordable, tariffs on these items may affect the middle class a few years from now in a big way.
Inflation has already seen a steep incline in the price of vehicles, even used ones. What once was $20,000 is now $30,000, and what once was $30,000 is now $50,000. It's getting to the point where younger people are moving into cities and avoiding purchasing a vehicle altogether.
And that was before the tariffs.
Now, tariffs on imported cars are going to become pricier than ever. Even domestic cars will see price hikes because commodities like steel and aluminum, the materials used to make the cars, are going to become more expensive to import.
'The combination of steel and aluminum tariffs, as well as the supply chains that rely heavily on outsourcing, will potentially make the purchase of new automobiles cost-prohibitive for many Americans. It is likely that many Americans will hold onto their vehicles longer or purchase used cars as an alternative,' explained Dr. Brandon Parsons, an economist at Pepperdine Graziadio Business School.
As a result of this enormous shift, the American automobile industry may falter significantly with fewer domestic consumers and foreign markets uninterested in buying American.
Much like automobiles, new homes are going to become much more expensive to build. Wood, metal and other materials will be cost-prohibitive, which means housing prices are going to skyrocket once again.
'The cost of buying a new home will go up since many of the products that go into new homes, such as metal and wood, are exposed to tariffs,' Parsons noted.
The housing market is already ridiculously overpriced and unaffordable to even the wealthiest middle-class families. The American Dream that imagines homeownership as essential is likely going to be dead within a decade if things don't turn around.
Seann Malloy, founder and managing partner at Malloy Law Offices, reminds us there are smaller, everyday items that will quickly become unaffordable to the middle class, as well. The middle class has gotten to the point in life where they can enjoy the finer things in life, like good wine, coffee, seafood, and even the finest olive oil.
Yes, those items may be a bit more expensive, but now they're within reach for the middle class.
But Malloy said that won't last.
'Taxing imports of things like seafood and coffee could mean significantly higher grocery bills. According to the Center for American Progress, middle-income households are set to lose between $2,500 to $3,900 a year,' he explained. 'Stock up on non-perishables and explore local farmers' markets to mitigate costs.'
Is there a way out? Yes, of course there is. Middle-class families could start living well below their means and prepare for an economy that won't allow for the usual items to be affordable anymore.
You may need to buy a less expensive, smaller home. Perhaps you'll need to cut corners in luxury items, and you may even have to buy a used appliance or a refurbished computer.
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This article originally appeared on GOBankingRates.com: 5 Things the Middle Class Won't Be Able To Afford After 4 Years of Tariffs
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