Trump’s Tariff Policies and Tax Reductions: Who Gains the Greatest Advantage?

Main Insights

• Recent research indicates that the wealthiest 1% of Americans are set to gain the most from upcoming tax reductions, with an average benefit of $8,850 in 2026.

• Tariffs tend to hit lower- and middle-income families harder, as these groups spend a larger portion of their earnings on goods.

During President Donald Trump’s first year, major policy shifts occurred, including the introduction of new tariffs and sweeping tax reforms.

However, a report from the Institute on Taxation and Economic Policy (ITEP) highlights that the advantages of these changes are not distributed evenly among Americans.

Researchers examined the impact of Trump-backed policies—such as tariffs, the ending of Affordable Care Act subsidies, and the One Big Beautiful Bill Act (OBBBA)—on households across different income levels.

The findings reveal that individuals earning over $916,900, representing the top 1%, will see the largest tax breaks in 2026, averaging $8,850. In contrast, those with incomes between $92,100 and $153,600 are expected to pay an additional $980.

How These Policies Affect You

The effects of Trump’s policies vary based on income. Higher earners are more likely to benefit, as they allocate a smaller share of their income to goods and are less dependent on government assistance.

Tariffs are also having a noticeable effect on Americans’ finances. Martha Gimbel, cofounder and executive director of the Yale Budget Lab, points out that tariffs disproportionately burden low- and middle-income consumers, who spend more of their income on goods.

(Although the Supreme Court recently overturned many of Trump’s tariffs, his administration has reinstated several tariffs under a different statute.)

According to Gimbel, wealthier households typically spend more on services like tutoring or pet care, so increases in the price of goods primarily affect those with lower incomes.

Analysis from the Yale Budget Lab estimates that the new tariffs—set at 15% and lasting 150 days unless extended—will cost households between $600 and $800.

Gimbel also notes that the uncertain future of these tariffs makes it difficult to precisely measure their economic impact.

“It’s not clear whether the 150-day tariffs will withstand legal challenges,” Gimbel explains. “Uncertainty itself carries an economic cost, and we’ll have to wait to see how significant that cost becomes.”

Additional Policy Impacts

Regarding the OBBBA, some provisions—like the Senior Tax Deduction and No Tax on Tips—may temporarily help low- and middle-income families. However, these benefits are short-lived, and other measures, such as reductions to Medicaid, could outweigh these gains over time.

“The One Big Beautiful Bill Act isn’t just about taxes,” Gimbel adds. “It also includes spending cuts. Lower-income Americans could lose Medicaid or SNAP benefits. When you consider both the OBBBA and tariffs, most people are worse off—except for those in the top 10% of earners.”

ITEP’s analysis shows that the lowest 20% of earners, making less than $30,700, will see their total tax burden rise by 3.1% of income. Households don’t see a net benefit until their income exceeds roughly $361,000, and only the top 1% experience a significant tax cut.

Separate findings from the Congressional Budget Office indicate that the OBBBA would leave the poorest 20% of Americans worse off every year through 2034.

Read the full article on Investopedia.