According to recent projections from The Budget Lab (TBL) at Yale University, the tariffs in place for 2025 are set to have a significant impact on the clothing and textile industries, causing U.S. consumers to face a 40% increase in shoe prices and a 38% rise in apparel prices in the short term. Over the long run, prices are expected to remain elevated, with footwear costs approximately 19% higher and clothing prices 17% higher.
TBL, a non-partisan research center, conducts thorough analyses of federal policy impacts on the American economy. Their estimations cover the effects of all U.S. tariffs and retaliatory measures implemented up until July 31, 2025, including the new ‘reciprocal’ tariffs scheduled to take effect on August 7.
Currently, U.S. consumers are dealing with an average effective tariff rate of 18.3%, the highest level since 1934. After accounting for shifts in consumer behavior, the adjusted average tariff rate is projected to be 17.3%, marking the steepest rate since 1935.
The cumulative impact of the tariffs is expected to push prices up by 1.8% in the short term, assuming the Federal Reserve (Fed) does not take action in response to the tariffs. In this scenario, real income adjustments would primarily occur through increased prices rather than nominal income changes. Should the Fed intervene, some adjustments may result in reduced nominal incomes. Households in the lowest income brackets are projected to face pre-adjustment losses of $1,300, with post-adjustment price hikes settling at a 1.5%, resulting in an overall loss of $2,000 per household.
Further, the tariffs are estimated to lower U.S. real GDP growth by 0.5 percentage points each year during 2025 and 2026, leading to a long-term reduction in the economy’s size by 0.4%. The unemployment rate is anticipated to increase by 0.3 percentage points by the end of 2025 and by 0.7 percentage points by the close of 2026, with TBL predicting a drop in payroll employment of about 497,000 jobs by year-end.
In the long run, the tariffs create a complex trade-off: while U.S. manufacturing output is expected to rise by 2.1%, these gains are likely to be offset by declines in other sectors such as construction, projected to decrease by 3.5%, and agriculture, which may see a decline of 0.9%.
Overall, the tariffs enacted in 2025 could generate $2.7 trillion in revenue from 2026 to 2035, despite incurring $466 billion in negative dynamic revenue effects, resulting in an anticipated total dynamic revenue of around $2.2 trillion.
