Levies will transfer money from poor to rich: Experts

Economists warn that US President Donald Trump's tariffs will swipe a large portion of wealth from lower-income US families and redistribute it to higher-income individuals as the levies on goods will overwhelmingly affect the poor rather than the wealthy.

Robert Reich, a noted economist, a professor at the University of Berkeley and former US secretary of labor, explained that while Trump says his tariffs are going to bring in money for the economy which will enable a gigantic tax cut, he ignores the fact that the people who will pay for the levies are overwhelmingly low-income US citizens.

"Tariffs are like regressive taxes, they hit the poor and working-class pocketbooks much, much, much more significantly than they hit the pocketbooks of the wealthy and the paychecks of the wealthy versus the paychecks of average working people," Reich said on The Coffee Klatch, a podcast.

"And yet the tax cut like the first Trump tax cut is primarily going to benefit the wealthy. Put this together and you have a gigantic redistribution upward from working people and the poor to the very wealthy."

The predictions by Reich come after Trump unveiled his most expansive list of tariffs yet on trading partners.

While wealth disparity has always existed in the US, it has now worsened. Last year, the top 50 percent of households controlled 97.5 percent of the country's assets.

At the end of 2024, the top 1 percent of US citizens owned 31 percent of the nation's assets, a rise on the 23 percent in that group in 1989 when the Fed began maintaining records.

In contrast, the share of assets owned by the poorest was 2.5 percent in 2024, a slip from 3.5 percent in 1989.

Trump, a real estate business owner and former TV star worth $5.1 billion, has nine other billionaires in his team helping him to create policy and run departments, Forbes reports. His administration is the richest in US history.

Trump has repeatedly championed tariffs as a policy that will bring back jobs and ignite US manufacturing. But countless economists have warned for over a year whose wallets will be most affected by the taxes if companies pass on the costs they are forced to pay.

Biggest consequences

"Lower income US consumers will face the biggest consequences from the new tariff hikes," Thomas Fullerton, an economics professor at the University of Texas at El Paso, told China Daily.

The US imports over $3 trillion worth of goods per year. Its largest trade partners are Mexico, Canada and China.

The tariffs threaten to raise prices further on cars, electronics, pharmaceuticals and metals.

Fullerton adds that the reason low-income consumers will be hit harder is that "they purchase more merchandise goods than services" and much of these come from China.

Several other studies and economists echo Reich's sentiments. The nonpartisan Tax Foundation found that the average US household could have to fork out an extra $2,100 per year for goods due to the tariffs.

The Budget Lab at Yale, a public policy think tank, estimates that the tax cuts would give the top 1 percent of earners a boost of $43,500 a year, but give the lowest 20 percent a loss of $1,125 per year.

The new taxes "take a larger share of income from poorer households than richer households," Mary Lovely, professor emeritus of economics at the Maxwell School of Citizenship and Public Affairs of Syracuse University and senior fellow at the Peterson Institute for International Economics, told China Daily.