8 Ways Trump’s Turbulence Tax Is Costing the Economy

As increased tariffs begin to take effect following months of fits and starts, signs that the U.S. economy¹ is beginning to weaken are growing, despite the fact that belief in President Donald Trump’s ability to manage the economy² and reduce inflation was a leading reason for his narrow election win in 2024. Trump administration policies have raised costs for working- and middle-class Americans—an effect that has been compounded by a “Trump Turbulence Tax,” which is the cost imposed on consumers and businesses due to the president’s irrational, unpredictable approach to policymaking and running the government. The president’s pursuit of tariffs—with its shifting rationales, arbitrary formulas, and repeated changes to deadlines—exemplifies how the Trump Turbulence Tax is disrupting nearly every aspect of the U.S. economy, leading businesses to delay investment and hiring, increasing costs for businesses and consumers, and undermining the faith in the rule of law that is the bedrock for ongoing investment in the American economy.

The Trump administration’s tariffs are on track to cost the typical household an average of $2,400³ per year, according to the Yale Budget Lab. Moreover, the typical small business that imports products already faced more than $90,000 in tariff costs from April 2025 to July 2025 alone; they are also reporting revenue losses of about 13 percent,⁴ which will annualize to $100,000 if tariff costs continue to mount at this rate. These costs are only the beginning of the toll that Trump’s turbulence will take on businesses and consumers in the months to come. The August 29, 2025, decision⁵ by the U.S. Court of Appeals for the Federal Circuit to invalidate the tariffs that the Trump administration invoked under the International Emergency Economic Powers Act—which represent the majority of the tariffs announced by President Trump since his return to office—only creates more uncertainty as the tariffs will remain in effect through October 14 to allow for the administration to appeal the decision.

The Trump administration’s first six months in office have been marked by strong statements and reversals that have unnerved markets and consumers. According to one report,⁶ the Trump administration had “announced new or revised tariff policies more than 50 times” as of mid-May, a number that has only increased⁷ since then.

Frequent tariff policy changes are only one indicator of the Trump administration’s chaotic tenure. The president has regularly criticized⁸ Federal Reserve Chair Jerome Powell, and his administration has leaked⁹ that it was considering an attempt to remove him from office; fear of a likely market backlash¹⁰ is likely one of the key factors holding¹¹ the president back from an illegal firing. President Trump took this assault on the independence of the Federal Reserve one step further on August 25 by attempting to fire¹² Federal Reserve Board Governor Lisa Cook, signaling more uncertainty over the future of the central bank in the coming months. Contributing to this instability are the president’s attacks against the federal judiciary¹³ and his political opponents, which echo the rhetoric¹⁴ of would-be strongmen¹⁵ such as Brazil’s Jair Bolsonaro and Hungary’s Viktor Orbán. This can hardly be reassuring to businesses looking for predictability.

Stability and predictability are critically¹⁶ important to businesses, especially small businesses. President Trump’s embrace of costly policies—such as nonstrategic tariffs,¹⁷ cuts to public benefits including Medicaid¹⁸ and the Supplemental Nutrition Assistance Program,¹⁹ and aggressive deportations²⁰ targeting workers in critical industries including agriculture²¹ that are already experiencing labor shortages—would prove challenging for businesses and consumers on their own. These policies are only amplified by the administration’s unpredictability. Businesses are generally shouldering the costs of increased tariffs²²—passing about one-fifth²³ of their burden along to consumers to date, according to one estimate—but tariff impacts will increasingly be seen in prices over time, with Goldman Sachs estimating²⁴ that nearly 70 percent of the costs of tariffs will ultimately be passed along to consumers in the form of higher prices. In the meantime, businesses are facing significant uncertainty²⁵ about the future direction of government policies that affect their bottom lines, making it difficult for many to make investments or hire.

The next sections examine eight ways in which Trump’s unsteady economic leadership is imposing a turbulence tax on businesses and consumers that costs them real money and acts as a drag on economic growth and job creation.

The numbers below illustrate how uncertainty around recent policies is driving rising costs for businesses and consumers.

Rising cost of living

The Trump administration’s economic mismanagement is driving up prices for consumers and businesses. The most recent consumer price index²⁶ (CPI) headline release showed one of its biggest monthly gains since January,²⁷ annualizing to an increase of 2.7 percent in July. This matched June’s pace and was up from a 2.4 percent increase in May. When the more volatile energy and food prices are removed, core CPI shows an annualized increase of 3.1 percent, which is slightly above expectations. This broad increase in the cost of living is already manifesting in visible ways for families, from the grocery store²⁸ to the car dealership²⁹ lot and more.

Rising prices may also be contributing to a slowdown in consumer spending, which has fallen to about half of its 2024 rate—from 2.8 percent in 2024 to 1.4 percent³⁰ in the second quarter of 2025. Also in July 2025, the producer price index³¹—which measures the prices paid to domestic producers and offers a leading indicator for future prices paid by consumers—experienced its biggest monthly jump in more than three years at 0.9 percent for an annualized rate of increase of 3.3 percent. The housing market is also under strain, with the latest homebuilder sentiment index³² falling to its lowest level in more than two years as elevated mortgage rates and tariff-driven material costs put homeownership further out of reach for many families. Overall, analysts from the Yale Budget Lab³³ expect an average per-household cost of $2,400 due to tariffs in 2025.

Trump administration policies are driving up consumers’ cost of living in four specific areas: new cars, health insurance, products for children, and cookout staples and other foods.

1. New cars

Borrowing costs for new cars have increased this year. According to an analysis from Edmunds³⁴ in August 2025, the average annual percentage rate for a new car purchase in July was 7 percent, up from 6.6 percent³⁵ in December 2024. This translates into about $400 more over the life of a typical five-year auto loan—based on an average price of $37,700³⁶—for a new car bought today compared with December.

On top of rising borrowing costs, anticipated tariffs could increase the average price of some bestselling new U.S.-made car models by 14 percent, or $5,286, based on brand-level projections from Insurify³⁷ made in May 2025.³⁸ These price hikes could be even steeper if the administration’s proposed 100 percent tariff³⁹ on imported semiconductors and chips⁴⁰ goes into effect. While exemptions for companies investing in U.S. production may soften the blow, the administration has not provided the details yet, adding to the uncertainty. Overall, if loan rates do not fall, consumers will end up paying more both to purchase and finance a new car—even for the same models bought just a few months ago.

2. Health insurance

The Trump administration’s One Big Beautiful Bill Act will increase the number of uninsured Americans by 10 million⁴¹ by 2034, and in 2026, millions more will face higher premiums due to the tariffs and the looming expiration of the Affordable Care Act’s (ACA) enhanced premium tax credits.⁴² ACA marketplace premiums are projected to rise⁴³ by a median of 18 percent nationwide⁴⁴ in 2026—an 11 percentage point increase compared with the 7 percent average annual growth⁴⁵ seen from 2023⁴⁶ to 2025.⁴⁷ Axios⁴⁸ reports that some insurers have cited the impact of tariffs on drug pricing as being responsible for 2 percent to 3 percent increases in premiums in 2026, based on recent regulatory filings by insurers in New York,⁴⁹ Maryland,⁵⁰ and Oregon.⁵¹ For example, UnitedHealthcare of Oregon Inc. requested an average 19.8 percent premium increase for small group enrollees in 2026, with an average monthly premium increase of $644. According to its rate filing,⁵² approximately 2.7 percent of the annual premium cost—about $209 annually, or $17 per month—was added “to account for uncertainty regarding tariffs and/or the onshoring of manufacturing.”

On top of these premium increases, the expiration of enhanced ACA premium tax credits at the end of 2025 will sharply raise costs even more for millions of people. A typical 40-year-old⁵³ couple earning $82,000 annually (401 percent of the federal poverty level) would see their monthly premiums for a silver plan nearly double—rising by $412, from $581 to $993 per month and resulting in an annual increase of approximately $4,946—if Congress does not extend the tax credits. In 2025, roughly 22 million⁵⁴ people had their premiums reduced because of the tax credits, and millions more could face affordability barriers if the credits are allowed to expire.

3. Products for children

The Trump Turbulence Tax is hitting children’s products hard, from toys to baby strollers to clothing. The price of toys has climbed by 3.7 percent in only four months⁵⁵ since the president announced increased tariffs against Chinese products in March.⁵⁶ This follows warnings from toy company leaders about the impact of tariffs on imports from China and other major toy-producing countries.⁵⁷ Prices of some top-selling essential baby products—including strollers, car seats, cribs, high chairs, and baby monitors—have increased⁵⁸ by more than 20 percent since April. Clothing and shoe prices are predicted to increase by nearly 40 percent in the short term,⁵⁹ influencing a record share of parents to do their back-to-school shopping early⁶⁰ to get ahead of tariffs. One popular Swedish clothing brand that makes children’s weather-resistant gear even recently announced⁶¹ it is abandoning the U.S. market due to the impact of tariffs.

4. Cookout staples and other foods

As the summer comes to a close, the prices of cookout⁶² staples have climbed since January 2025. Ground beef and sirloin steak prices hit all-time highs in July at $6.25 and $13.55 per pound, respectively, representing increases of 12.8 percent for ground beef and 13.3 percent for sirloin steak since January 2025. These increases appear to have been driven⁶³ by long-term structural factors including smaller herds and growing demand, but there is little relief in sight, as the Trump administration’s 50 percent tariffs⁶⁴ against products from Brazil took effect on August 6, 2025.⁶⁵ Brazil is responsible for more than one-fifth⁶⁶ of beef imports to the United States. The administration has also increased tariffs against Australia and New Zealand, two other major sources⁶⁷ of beef imports.

Higher beef prices are just one source of stress on the family cookout. Americans have also seen the average price⁶⁸ of boneless chicken breast climb by 5.9 percent in only five months to $4.20 per pound. Prices are expected⁶⁹ to go up further in part due to higher prices for other meats, which have been partially affected by elevated tariffs. For example, a family of four grilling each week between Memorial Day and Labor Day has seen prices for summer cookout favorites go up noticeably since January. Over the 14-week grilling season, families are paying about $19.85 more for ground beef, $6.58 more for boneless chicken breasts, and $44.49more for sirloin steak. These estimates represent increases of about 6 percent to 13 percent since the Trump administration took office and cover only the meat on the grill—not buns, drinks, or other sides. (see Table 1)

Beyond cookout classics, Americans face rising prices for other staples affected by tariffs, including coffee,⁷⁰ bananas,⁷¹ orange juice,⁷² and chocolate chip cookies.⁷³

Uncertainty for businesses

The Trump administration’s on-again, off-again approach to tariffs has imposed costs on businesses, due to both the tariffs themselves and uncertainty about future policy. Businesses are not only facing high costs for imported products and inputs but must also plan for future product purchases and investments in labor and capital in an environment with little clarity about future tariff levels. In fact, between April and July 2025, American businesses that import have already paid an additional⁷⁴ $67.3 billion, compared with the same time period in 2024, due⁷⁵ to the Trump administration’s tariffs. For the nearly 240,000⁷⁶ small business importers in the United States, this results in an average of more than $90,000⁷⁷ per business from April to July of 2025. The U.S. Chamber of Commerce projects that small businesses will pay up to $202 billion⁷⁸ annually, or nearly $856,000 per small business. Many of these businesses import goods for the purpose of reselling to other small businesses, meaning these costs will be passed on to a broader range of businesses even before they hit consumers in the form of higher prices.

Here are four ways in which the impacts of Trump administration’s policies are harming businesses: slowing down investment, undermining confidence in government data, shrinking profits, and increasing shipping costs.

1. Slowing down business investment

Businesses weathered significant volatility in the equities and bond markets during the first weeks following the president’s so-called “Liberation Day”⁷⁹ announcements in April of sweeping new tariffs, with the S&P 500 losing⁸⁰ about $2.4 trillion in value on April 3 alone—the largest single-day drop in stock market capitalization since⁸¹ March 2020. Markets have since recovered, but post-tariff swings reflected volatility, not lasting wealth loss. Despite the rebound in asset prices, many businesses remain cautious. According to second estimate gross domestic product data from the second quarter of 2025, gross private domestic investment fell at a 13.8 percent⁸² annualized rate—the steepest drop since the COVID-19 shock.

This decline in business investment is consistent with the findings of an Atlanta Federal Reserve Bank survey of businesses,⁸³ taken in April of this year, which found that firms planned to cut hiring by 13.4 percent and investment by 16.1 percent over the next six months due to policy uncertainty. Other more recent surveys⁸⁴ have found similar⁸⁵ results.⁸⁶ This increasingly widespread reluctance to invest and hire showed up clearly in the most recent jobs report from the U.S. Bureau of Labor Statistics (BLS). (see Figure 2)

2. Undermining confidence in government data

A disappointing July jobs report indicated⁸⁷ that the Trump administration’s sweeping tariffs likely had a negative impact on job growth. In August, President Trump fired⁸⁸ BLS Commissioner Erika McEntarfer. This assault on the BLS, which has maintained its independence in data production for decades, follows the administration’s repeated  targeting of Federal Reserve Chairman Powell. Should the president replace McEntarfer with a partisan appointee who actively seeks to dismantle the nonpartisan firewalls that ensure the reliability of BLS economic data, an important source of information for businesses and investors will be called into question. Studies have shown that regimes where central governments manipulate economic data overstate⁸⁹ their economic growth and face higher cost of equity investment⁹⁰ in corporations due to higher perceptions of risk. Unreliable economic data also increases uncertainty⁹¹ for businesses planning for future investments, purchases, hiring, and more.

3. Shrinking profits

According to the Federal Reserve’s July Beige Book,⁹² businesses reported experiencing price increases for inputs and insurance, which are compressing profit margins as companies try to avoid price increases for fear of losing consumers. A recent survey⁹³ from Alignable, a networking organization for small businesses, that was conducted in partnership with faculty from Harvard Business School and the Massachusetts Institute of Technology, found that 44 percent of small business owners reported in June that their revenues have dropped, up 18 percentage points from the month before. The survey also found an average revenue drop of 13 percent, with 20 percent of business owners reporting losses of more than 25 percent. According to one estimate in 2024, a typical small business earns about $1.22 million⁹⁴ per year. A 13 percent decline in that revenue would result in a loss of roughly $158,800 annually. Similarly, a KPMG survey⁹⁵ conducted in June of senior and C-suite executives at 300 large U.S. companies across industries found that 57 percent have already seen a tariff-driven reduction in gross margins, with roughly a quarter seeing declines of 6 percent or more.

4. Shipping costs and volatility

Shipping and freight conditions in mid-2025 remain challenging due to a mix of geopolitical tensions, trade uncertainty, and structural cost pressures. Frequent tariff changes have created more compliance challenges, driving⁹⁶ delays and rising costs that hurt both businesses and consumers, with tariff code errors and missing certificates of origin frequently cited as reasons for prolonged customs inspections and added fees for shippers and carriers. These disruptions are contributing to slower cross-border movement, as reflected in May 2025’s North American transborder freight data:⁹⁷ Year-over-year total freight among the United States, Canada, and Mexico amounted to $132.1 billion in May 2025, down 4.9 percent from May 2024. Truck freight declined by 4.6 percent, while rail freight dropped 13.6 percent, pointing to reduced demand and ongoing supply chain challenges.

Although the 90-day tariff⁹⁸ pause implemented in May briefly relieved near-term cost pressures, core tariffs already in place continue to drive up production costs and suppress shipping demand across freight-reliant industries. As a result, a wave of mass layoffs has swept across the logistics, manufacturing, and trucking sectors in 2025. More than 4,100 jobs in freight-related industries⁹⁹ were cut in recent weeks, with many companies citing inflation, declining volumes, housing market stagnation, and overall economic uncertainty as primary causes. At the same time, major truck manufacturers¹⁰⁰ have cut jobs due to weak demand, declining orders, and buyer uncertainty over emissions rules and tariffs.

Across the broader freight market, demand remains soft in both¹⁰¹ the industrial and consumer sectors as limited restocking and persistent inventory destocking suppress shipping volumes. Spot rates are flat¹⁰² or declining, and carriers face weak pricing power despite increasing structural costs; tariffs alone are adding around $375 per tractor and $580 per trailer, fueled by costlier components and materials. Equipment markets are also under pressure, with Class 8 truck¹⁰³ and trailer orders low, cancellations rising, and original equipment manufacturers scaling back¹⁰⁴ production. Meanwhile, regulatory uncertainty—particularly surrounding 2027 Environmental Protection Agency rules¹⁰⁵—is further delaying fleet investments. Altogether, the freight sector remains subdued, with capacity slowly rebalancing but overall visibility and confidence still limited.

Businesses and consumers crave predictability. From frequent and inconsistent announcements on tariff policy to trying to politicize historically independent institutions such as the Federal Reserve and the BLS, the Trump administration has made turbulence and uncertainty the drivers of its economic agenda. This chaos is imposing real costs across the economy, and it will threaten the nation’s long-term economic growth if the administration does not change course soon.

The author would like to thank Natalie Baker, Natasha Murphy, Ryan Mulholland, Emily Gee, and Corey Husak for their reviews, and Kennedy Andara, Aurelia Glass, and Brian Keyser for their fact-checking and research assistance.