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Tariffs. Whether you approve of them or not, they may be a tough pill to swallow.

The stock market has reacted severely, economists are raising the odds of a U.S. recession, and the Federal Reserve says both inflation and unemployment could get worse.

President Trump warned it won’t be easy, even though the end result will be worth it, he’s said. Some businesses have already started introducing tariff surcharges.

So leaving the politics out of it, what should households expect in terms of impact?

An additional $4,689 in costs a year, according to new estimates from Yale University’s Budget Lab, a non-partisan policy research center.

That’s the average loss in purchasing power — in 2024 dollars. The burden will range from nearly $2,100 a year for the lowest-income households to more than $10,000 for the highest.

Where will we feel it the most? When we go clothes shopping, for one. In the short run, leather and apparel costs are expected to go up the most, followed by electrical equipment, textiles and mineral products, the lab’s estimates show.

The lab ranked commodities by the biggest estimated increases and included the potential impact on prices both short-term and longer-term, when consumers would presumably start buying alternative products that are cheaper. Longer-term, the average annual cost could drop to $2,700.

Of course, added costs are only part of the economic equation. The president has identified multiple reasons for the new tariffs, including bringing manufacturing investment and jobs back to U.S. shores, which would have a ripple effect on many fronts.

And things are changing quickly, as is evidenced by the president’s recent 90-day pause on some tariffs. Plus, the tariffs are levers in ongoing global trade talks, meaning some nations could come to the table with proposals to lessen their burden.

For now, however, an escalating rift with China — one of the nation’s biggest trading partners — suggests we could be in a protracted trade war.

So what? It’s unclear how long the president’s unprecedented experiment in global trade will last or how it will all play out.

But you don’t want to get caught unprepared, even if an increase in household expenses is temporary. Shoring up your emergency savings, cutting back on non-essential spending, and taking a fresh look at your financial goals can help you weather whatever comes next.

Related Reading

•   Why Do Domestic Prices Rise With Tariffs? (Marginal Revolution)

•   The Economic Effects of President Trump’s Tariffs (Wharton Business School)

•   Making Sense of Recent Market Volatility (SoFi)

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.

SoFi isn't recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

This article appeared in SoFi's On the Money newsletter. Not getting it? Sign up here.

One of the advantages of buying a house with a fixed-rate mortgage is being able to budget for the same payment amount every month.

But if you bundle your insurance premium in with your monthly principal and interest, chances are what felt like a relatively fixed monthly housing payment has started to feel anything but fixed.

Since 2018, the average annual homeowners’ premium nationally has increased 62% to $1,761, or about $147 a month, according to Freddie Mac’s latest 2024 calculations. And costs vary widely, so premiums in some states are four or five times as high as others.

In fact, insurance has become a primary contributor to the country’s housing affordability crisis, in addition to the pandemic surge in real estate prices and a steep increase in mortgage rates.

The average premium climbed 24% between 2020 and 2024 after inching up just 1% over the previous four years, data from Harvard University’s Joint Center for Housing Studies show. And that’s after adjusting for the rapid inflation of recent years.

So is this trajectory the new norm? And if you own a home, do you have any recourse? Here’s what we know and how you may be able to reduce your costs.

The Impact of Climate Change

At a very basic level, insurers set their premiums according to their anticipated risks. When the likelihood they’ll have to pay a claim rises, so do their premiums.

As climate change has made the weather more volatile, the severity and frequency of extreme events like hurricanes and wildfires has increased, increasing the scope of insured damage. Disasters in 2022 and 2024 caused over $180 billion in total damage each year, making them two of the four costliest years on record, according to the National Oceanic and Atmospheric Administration.

This is one reason why insurance premiums vary so much by state. Between 2017 and 2023, Texas, Colorado, Arizona and other states west of the Mississippi — areas prone to tornadoes, hail, and wildfires — saw the fastest premium increases, according to the Federal Reserve Bank of Minneapolis, citing S&P Global data.

In fact, homeowners in tornado- and hurricane-prone states like Nebraska, Louisiana, and Oklahoma pay over $500 a month, more than five times as much as residents of Hawaii, Oregon and Delaware, according to a November analysis by Marketwatch Guides that put the national average at $227.

And a major study released by the U.S. Treasury Department’s Federal Insurance Office in January showed residents in the riskiest 20% of U.S. ZIP codes (those with the highest expected losses) pay 82% more in premiums than those in the least risky ZIP codes.

Plus, these pricier policies may provide less coverage than they used to. Many homeowners in hail-prone areas of the Upper Midwest, for example, are now responsible for a bigger share of roof repair costs, according to the Minneapolis Fed.

And then there are states like California and Florida, where insurers are abandoning disaster-prone markets altogether, forcing many homeowners to get more limited but often more expensive policies from their state’s “insurer of last resort.”

Other Drivers of Price Increases

But climate change is by no means the only factor in the sharp premium increases. In fact, some insurance industry groups have suggested that the link to climate change is sometimes overstated.

Other macroeconomic forces include:

•   The pandemic spike in inflation, which increased the cost of materials and labor needed to repair and rebuild homes

•   An increase in litigation and insurance fraud

•   More people moving into disaster-prone areas

•   A surge in the cost of reinsurance (insurance purchased by insurers) that’s at least partly related to the damage from extreme weather

And there are more typical reasons prices go up, like a change in your circumstances. Maybe you recently added on to your house, filed a claim, or installed what insurers deem an “attractive nuisance” such as a trampoline or swimming pool.

An Uncertain Outlook

While premiums may continue to go up, overall increases are expected to be less dramatic this year, some forecasts suggest. As an industry, insurers are adjusting to the new norms and profits have stabilized, according to the reinsurance giant Swiss Re.

Still, there is a lot of uncertainty. The impact of extreme weather is hard to predict. And new tariffs on U.S. imports could drive up rebuilding costs, Swiss Re said.

What You Can Do

Ok, that’s probably not what you wanted to hear. But as a homeowner, you do have options. Here are some things you can do to potentially lower your costs:

•   Shop around. Premiums can vary significantly by insurer, so it pays to explore all your options. You can do this by calling around on your own, going to an independent broker, or accessing an online marketplace like SoFi’s. (We let you compare quotes from up to 30 top insurers through our partner Experian Insurance Services.) Just make sure you’re comparing apples-and-apples coverage. Lower quotes aren’t necessarily less expensive if they come with reduced protection.

•   Ask your current insurer about discounts. These could be discounts you missed initially or ones you’re newly eligible for (because you’ve gotten married, for instance). Your insurer may reward you for your loyalty, for bundling your coverage with an auto or umbrella policy, or being claim-free for a certain number of years.

•   Increase your deductible. Your deductible is the portion of a claim you pay. Agreeing to shoulder more of it can help reduce your premium, but make sure you could actually afford the additional cost if you needed to make a claim. It’s important to weigh any potential coverage changes like this very carefully. You don’t want to leave yourself underinsured and in a financial bind.

•   Make your home safer. Upgrades cost money, so this is not a money-saver in the short run. But if you’re considering a new roof or installing a security system anyway, you may find that lower insurance premiums are an added benefit.

Next week in our series:
What to consider if you’re shopping around for better rates.

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.

SoFi isn't recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

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