Are Tariffs the Ghost of Christmas Future?

The holiday season is marked by time with friends and family, joy, and gift-giving. But could tax policy make the sticker shock from your shopping list next year tariffTariffs are taxes imposed by one country on goods imported from another country. Tariffs are trade barriers that raise prices, reduce available quantities of goods and services for US businesses and consumers, and create an economic burden on foreign exporters. -ying?

We may not be thinking of the 2025 holiday season just yet, but big changes are in store with President-elect Trump’s proposed steep new taxes on trade, including a 10-20 percent tariff on all imports, at least a 60 percent tariff on Chinese imports, and 25 percent tariffs on imports from Mexico and Canada.

Since ‘tis the season, let’s take a small Dickensian tour through trade policy, and perhaps learn a good Christmas lesson that will turn a “bah humbug” into a sincere “Merry Christmas.”

Tariffs Can Be a Tax on Your Gifts

Before we meet our ghosts, let’s answer a basic question: what do tariffs have to do with the holiday season? Lights, trees, matching family pajamas, and gifts for your loved ones are likely impacted by them. That’s because a tariff is a tax on imported goods, applied at the border when a business or person in the US purchases a good from abroad, increasing the price of foreign-produced goods.

The US is the single largest importer of goods in the world, buying $3.1 trillion of imports in 2023. The second largest category of imports was consumer goods—products like toys, clothing, jewelry, and electronics—amounting to more than $757 billion of 2023 imports.

But in recent memory, tariffs probably haven’t played that much of a role in your holiday planning.

Now, onto the ghosts.

The Ghost of Christmas Past

Our first ghost will take us back 100 years to the 1920s and then to the era of the Great Depression. In 1924, the average tariff rate on all imports was 15 percent.

Since the collapse in global trade after the Great Depression and high tariffs that brought the average rate up to 20 percent, US policy has shifted away from restrictive tariffs and toward lower tariffs.

While lower tariffs are far from the only factor in a happy Christmas morning, they certainly weren’t something that needed to be top of mind for holiday shoppers for decades. But they were in 2019 when then-President Donald Trump delayed implementation of new tariffs on Chinese imports ahead of the holiday season to avoid putting a burden on American consumers.

The Ghost of Christmas Future

I know the Ghost of Christmas Future comes last in the story, but we’re introducing our Ghost of Christmas Future right here.

The Ghost of Christmas Future can reveal higher prices for some gifts in 2025. If the full slate of Trump’s tariff proposals goes into effect, the Tax Foundation estimates that the average tariff rate could rise from 2.4 percent to 17.7 percent—the highest since 1934.

Though the US maintains high tariffs on certain categories of goods, including footwear and apparel, the current average tariff rate on all imported goods rests at 2.4 percent, and is unlikely to be what stops you from snagging your spouse a new necklace or your kids a new game console from their wish lists this year.

But if the US implements a new 10-20 percent tariff on all imports, plus an additional tariff on China to exceed 60 percent, more American consumers will feel the effect of the hidden tax that is tariffs.

Consider your kids asking for a new gaming console, which currently rings up at an average price of $617. If you decide to wait for the 2025 holidays, the proposed tariff increases alone would make that price climb to a staggering $863 for a gaming console. And that’s just one gift.

Christmas Wishlist Prices Would Climb Under New Tariffs

Source: National Retail Federation, “Estimated Impacts of Proposed Tariffs on Imports: Apparel, Toys, Furniture, Household Appliances, Footwear and Travel Goods,” https://nrf.com/research/estimated-impacts-proposed-tariffs-imports-apparel-toys-furniture-household-appliances; Consumer Technology Association, “How The Proposed Trump Tariffs Increase Prices for Consumer Technology Products,” https://shop.cta.tech/products/how-the-proposed-trump-tariffs-increase-prices-for-consumer-technology-products. From the NRF study, we used Scenario A tariffs of 10% universal and 60% China (resulting in a 70% tariff on imports from China) to closely match the tariff scenario in the CTA analysis of a 10 percent universal tariff and 60% tariff on all imports from China on top of existing tariffs.

The Ghost of Christmas Present

Thankfully, we are not currently dealing with an economic depression paired with high tariffs or a new round of historically high trade barriers. This Christmas, we can be grateful that these harmful policies are not currently on the landscape. And, as Ebenezer Scrooge himself was able to see into the future and recognize the errors of his ways, maybe those making economic policy will recognize the flaws in a policy that would increase costs and create economic harms, particularly at a time of gift-giving. Perhaps, one gift that will come is a simple announcement that the tariffs will not be coming home for Christmas.

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