How Trump tariffs are making it harder for Americans to pay down debt

When Donald Trump re-entered the White House, he wasted no time returning to a familiar economic lever: tariffs. Promoted as tools to strengthen American industry, these taxes on imported goods have long been a cornerstone of Trump’s economic vision. But beneath the rhetoric about protecting jobs and bringing supply chains home lies a quieter financial pressure—one that is increasingly squeezing American households already burdened with debt.

In 2025, Americans are not just dealing with inflation and high interest rates. They’re navigating a debt landscape that’s been reshaped by trade policy. For millions of consumers, tariffs have morphed into a stealth tax, subtly eroding purchasing power and making it harder to escape the cycle of high-interest debt.

A June report by the Budget Lab at Yale University estimates that the current array of tariffs will cost the average U.S. household an additional $2,000 this year. That figure isn't abstract—it’s the cumulative result of everyday price increases on items like electronics, household appliances, food, and apparel. In many cases, the tariff isn’t even visible on the receipt. Instead, it’s embedded in the wholesale cost of goods, passed along to consumers through higher retail prices. These incremental price hikes may not grab headlines, but their compound effect can be significant—especially for families with little financial buffer.

At the same time, wages for many American workers have not kept pace with rising costs. That gap between income and expenditure often gets bridged by credit cards or buy-now-pay-later options. But borrowing has become more expensive, and households are increasingly finding themselves stuck with balances they can’t easily pay off.

The Federal Reserve has kept interest rates steady at 4.25% to 4.5% since late 2024, even as inflation data suggested some cooling. One reason: trade policy volatility. Federal Reserve Chair Jerome Powell, speaking on a panel in early July, explicitly cited tariff-related uncertainty as a factor keeping the Fed from loosening monetary policy. “We would have had room to cut rates this year, if not for the ripple effects of the current tariff environment,” Powell said.

Because Fed rate decisions anchor the cost of consumer borrowing, this has major implications. Credit card APRs are now averaging 24.33%—just below their highest levels on record. Even the best-qualified borrowers are seeing APRs north of 20%. For those with weaker credit, interest rates of 27% or higher are becoming the norm.

This means that even small purchases left unpaid can snowball into significant debt. A $1,000 balance at a 25% APR, if only minimum payments are made, could take over five years to pay off and cost nearly $700 in interest.

A recent survey by resume platform Zety captured the mood among U.S. workers: 78% said that Trump’s tariff strategy would make it harder to manage or repay their debt. The sentiment cut across income groups, ages, and job sectors.

This isn’t just about politics—it’s about household economics. When the cost of goods rises, and wages remain stagnant, debt becomes the pressure valve. People rely on credit to bridge gaps, cover medical bills, or handle unexpected expenses. But when those interest charges increase in tandem with prices, even small debts become burdensome. The tariff-debt link isn’t immediate like a tax hike, but it is deeply structural. And for many households, it’s quietly reshaping how financial stress accumulates.

Tariffs are regressive by nature. They disproportionately affect low- and middle-income households because these groups spend a greater percentage of their income on essential goods—the very items most likely to be imported and therefore subject to tariffs.

For example, items like clothing, electronics, and home appliances are more vulnerable to price spikes due to supply chain exposure. And while higher-income households may absorb a 10% price increase without shifting their behavior, for lower-income households, these costs often translate into delayed payments, skipped bills, or increased credit card usage. In this way, trade policy becomes not just a geopolitical tool—but a household budget disruptor.

In times of economic uncertainty, lenders grow cautious. Banks and credit card issuers are increasingly tightening their standards—especially when they sense macro-level volatility. Trade-related instability, combined with a lack of clear monetary direction, has made lenders more risk-averse in 2025.

As a result, it’s harder to qualify for a 0% APR balance transfer or a low-interest personal loan. Lenders are shortening promotional periods, raising minimum credit score requirements, and adding new conditions to promotional offers. This creates a catch-22. Consumers most in need of debt relief—those already under stress—are the ones least likely to qualify for the best tools. Still, financial experts say that borrowers shouldn’t give up hope. There are ways to ease the burden, even in a high-rate environment.

It may sound old-fashioned, but calling your credit card issuer and requesting a lower APR can still yield results. According to LendingTree, cardholders with good payment histories and improved credit scores are often able to negotiate reductions—sometimes by several percentage points. A lower APR can mean faster debt repayment, lower minimum payments, and more budget flexibility. It’s not a magic bullet, but it’s a worthwhile first move.

If your credit score is above 690, you may still qualify for a 0% APR balance transfer card. These offers can allow 12 to 21 months of interest-free repayment, giving borrowers a crucial window to reduce principal. Be cautious, though. Transfer fees (typically 3–5% of the balance) can eat into savings, and missing a single payment could void the promotional rate. This tool is best suited for borrowers with stable income and a clear repayment plan.

Another option for managing high-interest credit card debt is taking out a personal loan. These loans typically come with fixed rates and defined repayment timelines, which can offer predictability and peace of mind.

According to the Federal Reserve, the average rate on a two-year personal loan was 11.66% in early 2025—less than half the average credit card APR. Borrowers with good credit and stable employment may be able to find even lower rates through credit unions or online lenders. Keep in mind that a personal loan is a new obligation, and monthly payments are fixed. It’s a tool best used when you’re ready to get serious about eliminating debt, not just reshuffling it.

While tariffs may feel like a distant, policy-level issue, they are having real effects on consumer finance. High borrowing costs, rising prices, and a tighter lending environment are combining to create a fragile situation for many households.

This is the time to revisit your financial playbook—not just to react, but to plan. Build or replenish emergency savings if you can. Take a hard look at recurring debts and make a repayment timeline. Prioritize high-interest balances over low-interest ones. And if your income allows, try to reduce reliance on credit altogether.

In a volatile economic environment, clarity and discipline become your strongest allies.

Trade wars, rate hikes, and fiscal brinkmanship may dominate the headlines. But for most Americans, the daily concern is much simpler: Will I be able to make my payments this month? Trump’s tariffs were designed as a bargaining chip in global negotiations. But their unintended consequence has been to strain household budgets, elevate debt burdens, and keep borrowing costs stubbornly high.

Debt doesn’t exist in a vacuum—it reflects the economy we live in. And right now, that economy is one shaped by geopolitics, interest rate hesitation, and structural inflation. For consumers, the best response isn’t outrage. It’s strategic adaptation. That means using the tools that still work—asking for lower rates, consolidating smartly, and budgeting for flexibility. Because even if the economy feels out of your control, your financial response doesn’t have to be.