It’s been impossible to ignore the effect of tariffs put into place by the current administrations throughout 2025. Groceries, gas, electronics — everything costs more than it did a year or two ago. As a result, more people are putting their everyday expenses on credit cards when they’re unable to cover them with their monthly cash flow. Unfortunately, the likely outcome is a sharp increase in consumer debt.
If the tariffs have put stress on your budget, know you aren’t alone. But rather than hide from the problem, it’s important to face it head-on. In this article, we’ll help you understand how tariffs can increase your expenses and push you toward debt, as well as what you can do about it.
What Tariffs Mean for Your Wallet
How Tariffs Increase Prices on Everyday Goods
A tariff is a tax that’s imposed on imported goods. What many people don’t realize is that the company or individual importing the goods, not the exporting country, is the one that pays the tariff. And in many cases, they pass these tariffs along to the consumer in the form of higher prices.
For example, let’s say a company imports TVs to sell in the United States. The TV previously cost the company $500, and they sold it to U.S. consumers for $750. If the company has to pay a 50% tariff on the TV, it now costs them $750, and they sell it to the consumer for $1,125.
The team at The Budget Lab at Yale has been tracking the effect of tariffs in the United States. According to its latest data, consumers are paying an effective tariff rate of 18%, which is the highest level since 1934. Some of the spending categories disproportionately affected by tariffs include metals, leather, clothing, textiles, and electronics.
For example, clothing prices have increased roughly 28% due to tariffs. A pair of jeans you previously paid $100 for might now cost you $128.
Impact on Your Disposable Income
For many people, these rising prices have had a significant impact on their disposable income causing them to go into debt. Incomes aren’t increasing as fast as as prices, meaning you’re probably getting the same paycheck, but with higher monthly expenses. As a result, there’s less money left over and more reason to use credit card to pay for day to day expenses.
Reduced disposable income means many families have been forced to eliminate nice-to-have purchases altogether, and may even be forced to choose between must-have items. Additionally, many people are now using credit cards to bridge the gap.
How Rising Costs Lead to Personal Debt
Changes in Consumer Spending Habits
Across-the-board price increases are leading to a change in consumer spending habits. Previously, consumers may have used their debit cards to pay for necessities or, if they used credit cards, paid them off in full each month.
But as life becomes more unaffordable, habits are changing. More consumers may be swiping their credit cards for their daily expenses. And instead of paying them off in full, they may be carrying balances from month to month, leading to interest (and even other fees, if they’re late on their payments) and mounting debt.
The Squeeze on Monthly Budgets
As budgets are getting tighter, necessary expenses like housing, utilities, and food are all competing for a limited income. And for many American households, that income simply doesn’t go far enough anymore. That has a few key consequences.
First, people may be struggling to make their minimum debt payments. Whether it’s your credit cards, personal loans, student loans, or something else, those debt payments may take a back seat to keeping a roof over your head and food in your pantry.
Additionally, people are dipping into their emergency savings, meaning there’s less money available if an emergency comes up. For example, if you had to use up your emergency fund to cover rent and groceries and then your car breaks down, the car repairs are probably going on a credit card, leading to even more debt and interest charges, and making it even harder to build your emergency fund back up.
Rising Credit Card Balances and Delinquency
Putting expenses on a credit card can seem harmless at first. A swipe here and there doesn’t seem particularly impactful, but it adds up, especially as interest starts to accrue.
According to the Federal Reserve Bank of New York, total credit card debt reached $1.21 trillion in the second quarter of 2025, 5.87% higher than one year earlier, and $27 billion higher than just one quarter earlier. If your credit card balance is growing and you’re feeling shame, know that it’s not just you — it’s a society-wide problem.
Growing credit card debt can lead to other problems as well. For example, a high credit card balance affects your credit utilization and can cause your credit score to go down. Additionally, it may eventually become difficult to make your payments. Late and missed payments lead to added penalties, higher interest rates, and even more harm to your credit score.
When Tariff-Related Costs Push Debt Out of Control
Warning Signs You’re in Financial Trouble
A few extra expenses on your credit card here and there seems harmless enough, but it’s important to look for warning signs that you’re in real financial trouble. Here are a few signs it’s time to take immediate action:
- Using debt to make other debt payments
- Only making minimum payments
- Seeing your credit card balance increase every month
- Receiving collection calls or threat letters
When you ignore these signs, they can lead to much larger issues, including lawsuits from lenders, judgments, and possible wage garnishment or bank levies to cover your debts.
Why Traditional Budgeting Isn’t Enough
Plenty of personal finance experts will tell you to budget to spend below your means. But as basic expenses keep rising and your income doesn’t, traditional budgeting advice simply doesn’t work anymore. In that case, it’s time to take more serious action.
In times like these, it may be necessary to consult a legal or financial professional who can help you address your debt situation. We’ll talk more about what that might look like later on.
Strategies to Manage Debt During Economic Pressure
So far, we’ve talked about higher costs, rising debt, and the scary consequences that can come from that. But it’s not all bad news. It’s also important to talk about immediate steps you can take to alleviate pressure on your budget and when it’s time to seek legal help for your debt.
Immediate Steps You Can Take
First things first, it’s time to prioritize your budget. If you haven’t already, go through your budget and identify anything that isn’t an essential expense and ask if you can temporarily cut it. Next, prioritize your essentials like housing, food, and utilities over your unsecured debt payments.
Next, proactively reach out to your creditors to discuss hardship programs. They may offer temporary relief to help you get back on your feet. And in the meantime, avoid taking on any new debt that isn’t essential. This will help slow the debt spiral.
When to Seek Legal Help for Debt Relief
If you’re unable to stop the financial bleed on your own, it’s okay to ask for help. A debt relief attorney can look at your situation and offer personalized advice and solutions.
First, a debt help attorney can help negotiate with your creditors and come up with debt settlement options that could help you get out of debt for less money. In the meantime, your lawyer can help prevent aggressive collection tactics and navigate any legal issues as a result of not paying your bills.
At Tayne Law Group, we help clients create personalized debt relief strategies to fit their financial goals and situations. We have decades of experience negotiating with creditors and helping consumers reduce and eliminate their debt.
Conclusion
Tariffs have created a ripple effect in people’s personal finances that can, unfortunately, trap people in credit card and personal loan debt. If you’re in this situation, you’re not alone. Plenty of other families are facing these same pressures.
If your debt has become too overwhelming to handle on your own, we want to help. Contact Tayne Law group today by calling (866) 890-7337 or filling out our short contact form to set up a phone consultation. We never share or sell your information, and all conversations are confidential.
