[Kangkook Lee's column] Trump and the K-shaped economy… Tariff burden on bottom 10% of U.S. households is three times that of the top 10%

Dr. Kangkook Lee is Professor of College of Economics at Ritsumeikan University in Japan and Affiliated Research Fellow at CUKPE

The expression describing the recent U.S. economy is the letter 'K.' It is not the K for Korea, but a K signifying that the gap is widening in the shape of a K. In October 2025, The New York Times published an article stating that while the wealthy saw a significant increase in consumption alongside rising stock prices, the lives of the low-income class became increasingly difficult amidst inflation. According to the international credit rating agency Moody's, the top 10% of income earners in the U.S. now account for approximately half of total consumer spending. It has reached the point where people say Americans are living in two different worlds.

Inequality in the United States is not a recent phenomenon, but the problem is that the gap has widened under the Trump administration. The Trump administration raised tariffs, arguing that globalization and international trade led to a U.S. trade deficit, weakened industrial competitiveness, and the loss of manufacturing jobs. Although economists refuted Trump's claims, he was re-elected president by gaining the support of workers, who were the losers of globalization. The United States announced that it would impose a base tariff of 10% on all imports starting April 2, 2025, and reciprocal tariffs ranging from 10% to 49% on imports from countries with trade surpluses toward the U.S.; following further negotiations, these reciprocal tariffs went into effect on August 7. Although the Supreme Court ruled in February 2026 that Trump's reciprocal tariffs were illegal, Trump imposed the 10% global tariff based on Section 122 of the Trade Act, which allows for temporary tariffs to be imposed for 150 days in situations of severe balance of payments deficits.

Along with tariffs, another pillar of 'Trump economics' is tax cuts. The Trump administration passed the 'One Big Beautiful Bill Act' (OBBBA) in July 2025. This act consists of renewing the income and corporate tax cuts of the first Trump administration, which were scheduled for the end of 2025; restructuring welfare spending by reducing eligibility for health insurance and food assistance programs for low-income earners; and increasing defense spending and government debt limits. It also includes federal income tax deductions for overtime pay and tips, as well as additional tax cuts for the elderly and the middle class.

The problem is that these tariff hikes and tax cuts have an adverse effect on income distribution and exacerbate inequality. According to an analysis by the Congressional Budget Office (CBO), the OBBBA's social welfare cuts and tax cuts for the wealthy are projected to cause after-tax income for the bottom 10% of households to decrease by an average of 3.1% annually between 2026 and 2034, while it is expected to increase by 2.7% for the top 10%. Furthermore, it is predicted that tariff hikes will have a significant negative impact on low-income groups heavily dependent on imports, leading to more unfavorable outcomes for them. According to an analysis by the Yale Budget Lab , the tariff burden on the bottom 10% of households is approximately three times greater than that on the top 10%. For example, assuming Section 122 of the Trade Act does not expire, disposable income for the bottom 10% of households is expected to decrease by 2.1% annually between 2026 and 2034, while that of the top 10% is projected to decrease by 0.7%. Furthermore, criticism is being raised that the Trump administration's labor policies, such as lowering the minimum wage for federal workers and appointing pro-employer commissioners to the National Labor Relations Commission, will weaken workers' rights and economic stability and worsen the lives of working-class households .

An examination of wage changes by income quintile confirms that inequality has widened under the Trump administration. According to the Atlanta Federal Reserve's Wage Growth Tracker , wage inequality narrowed during the economic recovery phase of the Biden administration (2021–2025) following COVID-19, as the wage growth rate for lower-income workers was higher than that of upper-income workers. This trend was also observed during the first Trump administration (2017–2021). However, after the second Trump administration took office in 2025, wage growth for low-wage workers slowed significantly, widening the gap between the upper and lower classes. This reflects the slowdown in job creation within the labor market and is closely linked to the uncertainty caused by rapid tariff increases. Ultimately, the Trump administration's economic policies are exacerbating inequality in both primary distribution within the labor market and secondary distribution of disposable income. Furthermore, according to the Bureau of Labor Statistics, the labor income share—the share of U.S. GDP taken by workers—falls to 53.8% in the third quarter of 2025, the lowest level since statistics began in 1947. This reality served as the backdrop for the victory of Mam Dani, a left-wing Democrat who advocated for "affordability" and called for rent freezes and increased taxes on the wealthy, in the New York City mayoral election last November.

In reality, the employment situation has not been very good under the Trump administration . Although the total number of non-farm jobs in the U.S. increased by 178,000 from the previous month in March 2026—better than expected—and the unemployment rate fell to 4.3%, volatility persists, with jobs decreasing by 133,000 in February. Compared to March 2025, prior to the tariff hikes, the total number of jobs increased by only about 260,000, while manufacturing jobs actually decreased by 75,000, representing a 0.6% decline relative to total manufacturing employment. The unemployment rate among low-income Black workers and the proportion of long-term unemployed—those unemployed for 27 weeks or more—have also continued to rise. The Manufacturing Purchasing Managers' Index, an indicator of manufacturing activity, rose in 2026 but continued to slow through the end of 2025 following the Trump administration. This is largely due to the impact of reduced export orders and imports in the manufacturing sector, which is closely intertwined with global supply chains, as uncertainty increased due to tariff hikes. This is because rising tariffs harm U.S. companies importing intermediate goods, and a slowdown in international trade simultaneously stagnates global and U.S. growth. In other words, the current state of the U.S. economy does not support Trump's claim that raising tariffs will reduce the U.S. trade deficit and revive the manufacturing sector.

In contrast, the wealth of the ultra-rich has recently increased even more rapidly. According to Professor Zucman of the Paris School of Economics, the share of national income held by the top 0.00001% of the wealthiest people in the U.S.—a mere 19 individuals —reached approximately 12% in November 2025. This is an increase compared to about 10% a year earlier. The reason billionaires have become even wealthier is the skyrocketing stock market values ​​of tech companies. The wealth of the top 0.00001% already reached $2.6 trillion by the end of 2024, an increase of about $1 trillion compared to the end of 2023. Their share of total wealth also rose from 1.2% at the end of 2023 to 1.8% at the end of 2024. Since then, their wealth is projected to increase by approximately $700 billion by the end of 2025. Ultimately, in stark contrast to middle-class and lower-class workers, the wealth of the super-rich who have seized technology and capital with the development of artificial intelligence (AI) is increasing astronomically.

Interestingly, economic growth in 2025 was not that bad. The U.S. economic growth rate in 2025 was recorded at 2.1%, which was lower than the 2.8% in 2024 but a better result than feared regarding the impact of tariff hikes. Personal consumption expenditures increased by 2.6%, fixed investment by 2.7%, and equipment investment by 8.3%. Although the growth rate in the first quarter was -0.6% on an annualized basis compared to the previous quarter due to slowing consumption and a surge in imports in anticipation of tariff hikes, it rose to 3.8% in the second quarter and 4.4% in the third quarter before falling to 0.5% in the fourth quarter. While the growth rate of personal consumption expenditures was low in the first quarter, it rose from the second quarter onwards, and fixed investment saw particularly high growth in the first half of the year driven by an increase in equipment investment. However, it should be noted that U.S. growth in 2025 was underpinned by a surge in investment related to the AI ​​boom, such as the construction of data centers by Big Tech companies. Professor Jason Furman of Harvard University pointed out that fixed investment in information processing facilities and software surged by approximately 27% on an annualized basis in the first half of 2025, and that excluding this, the economic growth rate for the first half of 2025 was merely 0.1% . Given the uncertain profit outlook for AI companies, it remains to be seen whether such massive investments can continue. Furthermore, the recent war between the U.S. and Iran is expected to lead to stagflation, which lowers growth rates and drives up prices. Indeed, the consumer price inflation rate in March 2026 rose significantly to 3.3% year-on-year.

Ultimately, the current U.S. economy is tracing a "K-shape," characterized by widening disparities despite sustained growth. In particular, while consumer spending has steadily increased, there are growing voices arguing that this growth is primarily driven by the high-income class, obscuring the reality of the diverging macroeconomic growth figures. This, of course, runs counter to Trump's promise to make America great again. Consequently, President Trump's approval ratings have fallen since taking office, and public opinion regarding inflation, jobs, and the economy has significantly worsened. Now, faced with an economy unfolding in a K-shape, American workers who supported him are turning their backs on his misguided economic policies. They are questioning who this economic growth is truly for. In a previous New York Times article, a woman in her 40s working for Uber asked rhetorically, "Who is it good for?" in response to claims that the economic growth figures are favorable. This is a question we, too, must ask ourselves.

(This article was originally published as a column in Hankyoreh in Korean and translated into English with the help of Google Translate. The views expressed in this article are those of the author(s) and do not represent the official stance of the center.)