US tariffs widen high- and low-income consumer divide

The more aggressive ramp up in tariffs caused us to lower, but not slash, our forecast for real consumer spending this year. Spending on goods will be hit harder than services, and tariffs will widen the gulf between high- and low-income consumers.

What you will learn:

• Because low-income consumers spend a disproportionate share of their income on non-discretionary goods, the increased consumer prices due to tariffs will weigh more on them.
• With tariff revenues likely to help fund a portion of the coming tax cuts, the overall thrust of fiscal policy over the next few years will be regressive.
• That will reinforce the trend of a bifurcated US consumer, with spending by high-income households continuing to grow at a rapid pace while low-income consumers struggle.