The Hidden Cost of Tariffs: How Trade Policy Fuels Debt and Bankruptcy
By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).
As a bankruptcy attorney and now professor who has published extensively on consumer debt and finances, I have been closely watching the effects of the Trump administration’s trade policies and their impact on the average American household.
For months, I have argued the position that the cumulative effect of tariffs would “nickel and dime” consumers, ultimately increasing personal debt unless substantial cuts in household expenses are made. The new wave of the Trump administration tariffs adds to this financial stress, with a significant impact to be felt at the grocery store.
The data and recent reporting suggest that the new tariff war could increase an average household’s weekly grocery spending by as much as $40 per week. Household budgets could increase by $2,700 or more, according to the Yale Budget Lab.
This financial squeeze is occurring during an already stressed economic period for many. My research leads to whether than has been an increase in bankruptcy filings, and the short answer is yes!
Key Grocery Items Under Threat
The following items are subject to tariffs that are most likely to impact your weekly grocery budget:
Dairy and Cheese: The Global Ripple Effect
Tariffs are a double-edged sword for the U.S. dairy industry, affecting both imports and exports. During the first Trump administration, retaliatory tariffs severely damaged Wisconsin’s dairy sector, particularly cheese exports to Mexico. This led to a significant government bailout program intended to stave off widespread farm bankruptcies.
As of June of this year, farmer bankruptcy filings have already exceeded the total number filed in all of the previous year.
Coffee and Politics
Coffee, primarily sourced from Brazil, is now subject to the Trump tariffs. Why? Reports suggest the tariffs on Brazil are linked to the prosecution of former Brazilian President Jair Bolsonaro (aka The Trump of the Tropics). President Trump posted on Truth Social that the prosecution of Bolsonaro was a “witch hunt” and then imposed the 50% tariff, according to Forbes and multiple news outlets.
Produce: Chocolate, Fruits, and Vegetables
Tariffs on produce, chocolate, and related goods introduce significant cost increases for household budgets. For instance, a separate tax has been imposed on tomatoes, which has a significant impact, considering that approximately 70% of the tomatoes consumed in the U.S. are imported from Mexico.
Even within the U.S., similar problems exist. My home state of Florida is experiencing a substantial price hike in orange juice because farms are experiencing a labor shortage. Laborers aren’t using H-2A visas, which makes it harder to fill jobs. This shortage reduces supply and drives up prices, a textbook example of cost-push inflation.
Specialty Imported Goods: Olive Oil, Tea, Wine, and Spirits
For imported goods like olive oil and tea from Japan, and various spices, wine, and spirits, the direct tariff cost will inevitably be passed on to the consumer. This increase affects not only in-home consumption but also impacts the operating costs for restaurants, likely leading to notably higher bills for dining out.
The Economic “Snowball Effect”
The true danger lies in the economic “snowball effect.” When one nation imposes a tariff, a retaliatory tariff is usually the response. This impact is felt across multiple industries. For example, Canada stopped purchasing bourbon from Kentucky as a direct response to the Trump tariffs. This hurts the distilleries, employees, and local businesses.
Conclusion: Analyzing Your Personal Financial Exposure
The list above shows how costs are adding up—and even cautious estimates suggest families could end up paying thousands more. The real problem is how these small price hikes pile up over time, hitting household budgets hard.
Before making any major financial decisions, you must analyze your household budget against the new, hidden costs of tariffs. The current environment demands extreme caution. Before committing to major debt obligations like a new car or home purchase, carefully re-analyze your long-term debt-to-income ratio, assuming this permanent increase in your cost of living.
Economic uncertainty has changed how people make decisions. Even buying a basic necessity like a riding lawnmower was a major financial gamble. I had to choose between going into debt now, which I didn’t want to do, or risking a big price hike next season because of tariffs and supply chain issues. It’s a clear sign that for many consumers, the days of quick, carefree spending are over.
Professor Hernandez is an attorney specializing in consumer finance and debt relief. He is the published author of Consumer Bankruptcy Law (Routledge Publishing) and teaches law and finance courses in both English and Spanish for an international university.
Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.
You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.
You can find additional categories by clicking below or by using the search feature at the top of this page:
Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.
Discover more from Bankruptcy.Blog
Subscribe to get the latest posts sent to your email.