Marcos Cabello, Bankrate.com
Tariffs could cost an average American household of $3,800 in 2025, according to Yale University’s Budget Institute. The estimate announced earlier this month that President Trump announced a 90-day suspension on tariffs, during which he has reduced most tariffs to 10%, maintaining higher rates in countries, including China.
Customs duties – taxes imposed on imports – cause prices to rise as businesses pass these additional costs to consumers. This inflationary pressure could keep your savings account yields longer, but that also means that your daily purchases can be quite expensive.
Here’s what you need to know about how tariffs affect your finances and practical strategies to prepare your budget and savings.
How tariffs affect your money
Tariffs can affect a wide range of consumer goods, with some categories facing sharper price increases than others.
According to a Yale Budget Lab research, products expected to be affected by tariffs include:
Electronics: Prices can rise up to 4.5% on smartphones, laptops and TVs. Some reports estimate that manufacturing an iPhone in the US could raise the cost to $3,500. They are also involved in some electronic products, including the Nintendo Switch 2, due to delays in pre-orders for US clothing and apparel. Leather products and apparel are two categories that are expected to see the highest price hikes. Budget Lab estimates these products will rise by 18.3% and 16.9% respectively. Automobiles: Both new and used cars can be more expensive, with an estimated 8.4% increase in automobiles and parts. This affects not only fully imported cars, but also American-made vehicles that use imported components. Furniture and household goods: Imported furniture such as tables, chairs, home decorations and more. Prices for textiles (9.6%), wood products (3.3%) and rubber and plastics (6.4%) products are all expected to rise. Raw materials: Products made from materials such as steel, aluminum and other metals will increase in prices by around 5.8%, which could affect everything from electrical appliances to packaging
How tariffs affect banks and interest rates
As prices rise due to tariffs, this contributes to overall inflation. This is a major concern for the Federal Reserve.
One of the Fed’s main tools to combat inflation is the federal funding rate, which indirectly affects the annual percentage yield (APY) of deposit products, including certificates of deposit (CDS) and savings accounts.
As the Fed raises its benchmark rate, it did to control inflation after the pandemic – APY tends to rise. It is important to understand the timeline of recent rate movements.
The Fed began cutting interest rates in September 2024 as inflation approached its 2% target. The yield in the deposit account continues quickly, dropping from a peak that has not been seen for over a decade. In March 2025, citing economic uncertainty, the Fed suspended its rate reduction cycle and did not change its fees.
Inflation cooled in March, according to the Labor Bureau’s latest consumer price index, but experts believe it’s unlikely that this will continue to chase Trump’s tariffs.
So the savings account yield could be promoted a little longer than previously expected. However, while great news about high-yield savings accounts, this benefit comes with potentially high price trade-offs that can save you every month.
Four budgeting strategies to offset tariff costs
Smart budgeting becomes even more important when prices rise. Here are four practical strategies to help you maintain financial health despite tariff-driven prices:
1. Track your spending and reduce as much as possible
The first step is to understand exactly where your money goes each month. This becomes even more important when prices are rising in multiple categories.
“Tracking your spending does two important things for you,” says Greg McBride, Bankrate’s chief financial analyst. “It tells you where your money is heading and reveals areas where you can cut to absorb higher costs elsewhere and concentrate more money on saving.”
During this time, we recommend checking your monthly expenses and identifying areas where you can cut them. This includes auditing recurring costs such as streaming subscriptions that you don’t need immediately. If you cut it down little by little, you will be able to free up cash that can be stored in your savings account.
We recommend that you redistribute funds from “requests” towards “needs” that can become more expensive, such as groceries, electronics, and household items.
2. Increase emergency funds
Emergency funds are your first financial defense, and with tariff-driven price increases, it’s even more valuable.
Experts usually recommend saving 3-6 months’ worth of important expenses, such as rent, utility and food.
But with a potential recession looming, now is a good time to increase the fund even more if you can swing it. Not only will it help you to cover the costs of higher prices and unexpected costs in the future, it will also help you isolate you from economic downturns as businesses can reduce their investment activities and cut back on their labor and survive economic headwinds.
Many banks offer features on their mobile apps so that they can split their savings into multiple buckets. Consider creating a “Customers Emergency Fund.” This will be a pool of money that you can withdraw to cover the raised prices.
3. Buy major purchases strategically
If prices rise, consider delaying large purchases if possible. This helps avoid overpayment of goods with temporary price increases and helps you focus on strengthening your emergency funds.
Big ticket items that can be considered for delays are products with expected price increases, such as new electronic devices such as mobile phones, TVs, laptops, and other items that are as expensive as new cars.
Factors for considering the timing of your purchase:
Are the items manufactured with important components from China or are they included? (These face immediate tariffs.) Is this purchase a need or a desire? To answer that you might ask yourself: Do you really need to buy in the next 3-6 months? Do I have the funds to buy without using credit? Can I find a domestically manufactured alternative product?
4. Compare retailers and country of origin prices
It is especially important to shop for products during this period, as products from countries with low tariffs can be inexpensive. In theory, domestic products must be inexpensive as they are not imported from other countries, but even domestic products can be made or packed with foreign materials such as steel and aluminum, which can be subject to customs duties.
Comparative shopping is especially valuable in grocery stores as many popular items are imported, such as coffee, chocolate, wine, and spirits. Other imported products that have a significant impact on the impact of tariffs include furniture, clothing and apparel.
Maximize your savings strategy
Budgeting helps you manage your cash, but a strong savings strategy will ensure that your money grows despite economic pressure. The current environment offers unique opportunities for savers if they know where to look.
Many of the largest institutions, such as Bank of America and Chase Bank, offer savings accounts at APY rock bottom rates of 0.01-0.02%. Your money grows dramatically faster (and much easier) with a high-yield savings account. Currently, top-class accounts have over 4% APY.
CDs are also a great option to hide any extra savings. In contrast to savings accounts, the CD comes with a fixed APY. This means you will gain the same interest during the account period. CDs can be a particularly attractive savings tool to isolate yourself from inflation and lower interest rates.
Also, if you have enough cash, consider opening multiple accounts and creating a CD ladder. This will help you take advantage of higher interest rates while maintaining regular access to a portion of your money.
Conclusion
Tariffs present a double challenge. Manage higher prices on daily purchases while optimizing changing savings in the interest rate environment. Knowing which product categories can see the biggest price increase will help you budget proactively rather than relaxed.
The silver lining means that tariff-driven inflation could continue to keep savings revenues rising longer than previously expected. You can find a savings account of 4% or more. Finding yields above inflation ensures that money does not lose purchasing power. That’s important because the rates are expected to raise prices.
©2025 Bankrate.com. Distributed by Tribune Content Agency, LLC.
Original issue: April 22, 2025, 3:39pm EDT
