By James Farias, CEO, Relief Strategies, LLC
Tariffs—taxes imposed on imported goods—have long been a tool in the U.S. government’s economic arsenal, aiming to protect domestic industries and generate revenue. However, their implementation has historically had far-reaching effects on the broader economy, particularly on individual financial health. With President Donald Trump’s recent announcement of sweeping new tariffs, it’s crucial to examine how such measures have influenced the economy in the past—and what they may mean for personal debt, credit profiles, and bankruptcy rates today.
A Historical Primer: Tariffs as Economic Fuel and Friction
In the late 19th and early 20th centuries, tariffs weren’t just protective—they were essential. Between 1798 and 1913, tariffs accounted for between 50% and 90% of total federal revenue, helping to fund government operations while nurturing domestic industry. During the period from 1871 to 1913, the U.S. economy grew at an impressive average annual rate of 4.3%, with tariffs credited for shielding emerging industries from foreign competition (Cato Institute).
However, this growth came with a trade-off. Tariffs increased the cost of imported goods, pushing up consumer prices and placing a greater financial burden on households. For many families, this led to increased use of credit, often straining debt loads and weakening creditworthiness—foreshadowing trends we’re beginning to see again today.
A New Tariff Era: Trump’s “Declaration of Economic Independence”
On April 2, 2025, President Trump announced a sweeping new tariff policy under a declared national economic emergency. Branded as a “Declaration of Economic Independence,” the plan institutes a 10% baseline tariff on nearly all imports. Countries with significant trade imbalances, such as Japan, Israel, and the European Union, face even higher rates—24%, 17%, and 20% respectively (White House, New York Post).
This new trade strategy is being positioned as a revival of American industry. Yet, economists and market analysts have raised concerns about the ripple effects on consumers, small businesses, and the broader economy.
The Rising Cost of Living—and Borrowing
The most immediate impact of tariffs is higher prices on everyday imported goods—cars, coffee, clothing, electronics, and furniture. Analysts from The Budget Lab at Yale estimate that the average U.S. household could see a $3,800 increase in annual expenses due to these tariffs (MarketWatch). For lower- and middle-income families, this is especially significant. Households earning between $30,000 and $60,000 could lose nearly 4% of their disposable income, while those earning $175,000 or more may only see a 1.6% reduction.
This shift arrives at a fragile moment for many Americans. According to the United States Courts, bankruptcy filings rose 14.2% in the 12-month period ending December 31, 2024. Meanwhile, data from the Federal Reserve Bank of New York shows that 3.6% of outstanding debt is now delinquent, with credit card delinquency rates trending upward.
If these cost increases take hold, they may drive households—already operating on thin margins—to rely more heavily on credit, increasing utilization rates and elevating the risk of defaults.
Tariffs, Job Losses, and Industry Disruption
The economic pain isn’t limited to consumers. Tariffs can also have significant consequences for industries that rely heavily on imported materials, driving up production costs, squeezing profit margins, and, in some cases, leading to layoffs or closures. For example, a 2021 report by the U.S.-China Business Council, in partnership with Oxford Economics, found that the trade tensions and tariffs implemented during the U.S.-China trade war—including those enacted under the Trump administration—resulted in the loss of approximately 245,000 American jobs. The report projected that if current policies remain unchanged, the U.S. economy could forgo up to 732,000 jobs by 2025 due to sustained trade restrictions and retaliatory measures by China. (USChina.org)
The automotive sector, for instance, faces a 25% tariff on imported vehicles under the new plan. Manufacturers may pass these costs to consumers, further inflating car prices and suppressing demand. Such contraction could lead to reduced workforces or even plant closures—hurting local economies and increasing financial strain on workers.
Are We Repeating the Past?
The cautionary tale of the Smoot-Hawley Tariff Act of 1930 looms large in any discussion of protectionism. Though not the sole cause of the Great Depression, Smoot-Hawley significantly worsened global conditions by triggering retaliatory tariffs and strangling international trade. The result was a deepening of the global economic downturn—a sharp warning about the unintended consequences of tariff-driven isolationism (Investopedia, NPR).
While today’s economic fundamentals differ, the scale and scope of the newly announced tariffs have economists worried about similar long-term effects: suppressed consumer demand, slowed global trade, and potentially prolonged recessionary trends.
What Households Can Do Now
In times of economic turbulence, knowledge and preparation become essential tools. As consumers face rising costs and potential financial pressure, there are several ways to fortify personal finances against these broader headwinds:
Build an Emergency Buffer. Even a modest emergency fund can help bridge income disruptions or cost spikes—reducing the need to rely on credit.
Focus on High-Interest Debt. Paying down credit card balances or consolidating debt can lower overall interest costs and free up budget flexibility.
Watch Industry Trends. Households working in manufacturing, retail, or trade-sensitive sectors should monitor employment trends and assess financial readiness for possible volatility.
Consult Financial Professionals. Advisors, credit counselors, and debt relief specialists can help assess options and create tailored plans for managing debt in a shifting economic climate (J.P. Morgan Private Bank, AP News).
If rising costs, growing debt, or financial uncertainty are starting to hit home, you don’t have to face it alone.
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Contact Relief Strategies for a free consultation and take the first step toward clarity and control.
Best regards,
James Farias
CEO of Relief Strategies, LLC
About the Author
James Farias is the CEO of Relief Strategies, LLC, a leading firm dedicated to helping individuals achieve financial freedom through effective debt relief solutions. With over 30 years of business management experience and a passion for empowering others, James has guided countless clients through their journey to reduce debt and regain control of their finances.
Recognizing how quickly debt can overwhelm even the most financially disciplined individuals, James focuses on strategies that reduce monthly payments, minimize financial stress, and unlock new opportunities. His mission is to help clients move past financial challenges and embrace a brighter future.
Connect with James on LinkedIn or visit Relief Strategies to learn more about how he and his team can assist you on your journey to financial freedom.
