There’s a lot of economic uncertainty on a global scale after the US administration threatened tariffs on pretty much every nation on Earth.
CNN warns that these tariffs could lead to stagflation, “a toxic combination of stagnant growth and rising inflation that plagued the Fed [the Federal Reserve] in the 1970s and early 1980s.” That being said, Fed Chair Jerome Powell recently said that despite concerns about stagflation, the American economy is on solid footing.
Meanwhile, the US job market appears to be doing well, with employers adding 177,000 jobs (more than expected) and the unemployment rate holding steady at 4.2% in April 2025.
However, the trade war sparked by the administration has led to a contraction of US GDP at an annualized rate of 0.3% at the beginning of the year.
Reporting on a recent analysis by the Yale Budget Lab, CNN states that the new tariffs could cost the average American household $2,000 in inflation-accounted disposable income a year.
For example, prices for computers could rise by over a tenth. Natural gas could spike by 5%. Rice could get 4% pricier. And the average price of a new car could reach over $50,000.
It’s not just tariffs that are to blame, of course. Many products and services have already gotten far more expensive over the past half-decade due to higher inflation.
As per CNN, the cumulative inflation rate over the past 5 years has been over 23%. Compare that to the median 5-year inflation rate since the late 1940s, which stood at just over 14%.
In short, Americans are forced to empty their wallets more at the grocery store. And that’s not good news for the 25% to 30% of Americans who live paycheck to paycheck.
Statista explains that wages and salaries are considered to be key economic indicators because they have a strong influence on a person’s quality of life
Back in 2000, the average annual wage in the United States stood at $57,499. It rose to $77,643 in 2022. That year, more than half of American households had an annual income of $75,000, but 11.5% were living below the US poverty threshold.
Between 2021 and 2022, the inflation rate in the US surpassed the growth of wages, with monthly inflation peaking at 9.1% in June 2022. Due to the pressure from inflation, over a third of American consumers reported struggling to make ends meet at the end of 2022.
However, the situation improved later. Between March 2023 and March 2024, monthly wage growth consistently outpaced monthly inflation.
