Trump has framed his second-term economic agenda as an affordability crusade, promising relief from high prices and borrowing costs in 2026. Yet the core pillars of that agenda, from sweeping tariffs to mass deportations and unfunded tax cuts, could instead push up everyday expenses and make it harder for households to stay afloat. I will walk through three concrete ways those policies, taken together, risk wrecking family finances next year.
1) Skyrocketing Everyday Prices from Blanket Tariffs
Trump’s plan for universal tariffs, including a 10 to 20 percent levy on all imports and a 60 percent tariff on Chinese goods, would sharply raise the cost of what Americans buy. An October 2024 analysis from the Peterson Institute for International Economics estimates that these measures would lift the average effective U.S. tariff rate to 17.8 percent in 2025, pushing overall consumer prices up by about 1.7 percent and adding roughly 2,600 dollars a year to the typical household’s costs by 2026. That kind of across-the-board increase would not be limited to luxury items, it would hit essentials like clothing, smartphones, laptops, refrigerators and car parts, because so many of those products rely on global supply chains. Recent coverage of the affordability squeeze has already noted that businesses, which had been absorbing some earlier tariff costs, are now more likely to pass higher import prices directly to shoppers, and reporting on affordability warns that Trump’s new tariff push could accelerate that shift in 2026.
The impact would be especially painful because it stacks on top of existing inflation fatigue. Even a 1.7 percent jump in prices, layered onto rent, utilities and insurance that have already climbed, can erase wage gains for middle income workers. For a family replacing a broken washing machine, upgrading a child’s school laptop or buying a used 2023 Toyota RAV4 that contains imported components, higher tariffs would quietly inflate the final bill. Economists who have discussed how Trump and the Federal Reserve might respond to the affordability crisis, including Joe Brusuelas in a recent discussion, have stressed that policy choices which raise underlying costs make the central bank’s job harder and can force interest rates to stay higher for longer. Even if some analysts, such as Ed Yardeni, have speculated that political pressure from an “affordability crisis” might eventually push Trump to scale back tariffs, his current stance still points toward a 2026 in which everyday goods cost more, not less, and households shoulder the difference.
2) Food and Labor Cost Surges from Mass Deportations
Trump’s pledge to carry out mass deportations of up to 11 million undocumented immigrants would hit affordability from a different angle, by shrinking the labor force that keeps food on shelves and services running. A November 2024 Democratic staff report from the Joint Economic Committee estimates that such a crackdown would reduce U.S. gross domestic product by 2.6 percent by 2026, a loss of about 1.1 trillion dollars in output. The same analysis finds that removing so many workers would drive up food prices by 5 to 6 percent because agriculture, meatpacking and food processing rely heavily on undocumented labor, and it projects that overall inflation would rise by 1.5 to 2 percentage points. For a household already squeezed by higher rents and medical bills, another 5 to 6 percent jump in grocery costs means paying more for basics like milk, eggs, tortillas and fresh produce, or trading down to cheaper, less healthy options.
The broader labor shock would ripple far beyond farms. Construction, hospitality, elder care and child care all depend on undocumented workers, so a sudden shortfall would push wages and operating costs higher, which in turn would show up in restaurant tabs, home renovation quotes and monthly daycare bills. That is why the Joint Economic Committee frames the projected 2.6 percent GDP contraction as a “catastrophic blow” to the economy, not just a marginal adjustment. Higher inflation from these labor shortages would also collide with Trump’s other policies, including tariffs and tax changes, compounding the affordability problem instead of easing it. While some supporters argue that tighter labor markets could raise pay for native born workers, the report’s numbers suggest that any wage gains would be overshadowed by higher prices and lost output, leaving many families worse off in real terms by 2026.
3) Higher Borrowing Costs from Unfunded Tax Cut Extensions
Trump has vowed to extend the 2017 Tax Cuts and Jobs Act without offsetting the lost revenue, a promise that carries major implications for deficits and interest rates. In its September 2024 baseline, the Congressional Budget Office projects that continuing those tax cuts through 2034, with no new revenue to balance them, would add 4.5 trillion dollars to the federal deficit over 2025 to 2034. According to that same projection, the heavier debt load would push long term interest rates up by 0.5 to 1 percentage point by 2026, raising borrowing costs across the economy. For a median household, the CBO estimates that higher rates would translate into 1,000 to 2,000 dollars more per year in payments on mortgages and auto loans, a hit that comes on top of any extra costs from tariffs and inflation. A family refinancing into a 30 year fixed mortgage on a 350,000 dollar home, or financing a 2025 Honda CR-V, would feel that shift directly in larger monthly checks to the bank.
Those higher borrowing costs would also interact with Trump’s broader affordability agenda in complicated ways. Analysts like Ed Yardeni have argued that an intensifying “affordability crisis” could eventually pressure the administration to moderate some policies, and Yardeni has suggested in one forecast that 2026 might bring political incentives to cut tariffs if voters revolt over prices. Yet the CBO’s numbers on deficits and rates indicate that, even if tariffs were trimmed at the margins, the legacy of unfunded tax cuts would still keep financing costs elevated. That would constrain how aggressively the Federal Reserve can lower rates without reigniting inflation, a tension that Joe Brusuelas and others have highlighted when weighing how Trump and the central bank might tackle affordability. For households, the bottom line is straightforward: a policy mix that swells the deficit while stoking price pressures risks locking in a 2026 environment where credit cards, car notes and mortgages all stay more expensive, making it harder to build savings or invest in education, retirement or a first home.
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*This article was researched with the help of AI, with human editors creating the final content.
Cole Whitaker focuses on the fundamentals of money management, helping readers make smarter decisions around income, spending, saving, and long-term financial stability. His writing emphasizes clarity, discipline, and practical systems that work in real life. At The Daily Overview, Cole breaks down personal finance topics into straightforward guidance readers can apply immediately.
