Chiugo Akujuobi, a 26-year-old who escaped their family's home in Houston earlier this year due to persistent transphobic remarks from relatives, has been relying on food banks and the generosity of friends for survival. Currently residing on a friend's couch in North Texas, Akujuobi, a 2021 graduate from Scripps College with a bachelor's degree, has been unable to secure full-time employment. Instead, they have been engaging in freelance work such as graphic design, social media marketing, and copywriting. Akujuobi is among the countless Americans grappling with the challenges of the current economic climate, having earned less than $10,000 this year, which is below the 2023 poverty threshold of $15,480 for a single individual, as per the latest Census Bureau data. The cost of living crisis in the United States has shown some signs of improvement, but those with low incomes continue to face difficulties following a period of high inflation and increased interest rates. Their plight could be exacerbated if President-elect Donald Trump follows through with his plan to impose substantial tariffs on the U.S.'s three largest trading partners, potentially reigniting inflation, according to economic experts.

"I'm not sure how I've managed to endure for this long," Akujuobi remarked. "If the situation deteriorates further, I'm confident that the less fortunate will continue to be resourceful. We simply make the best of what we have." Although inflation has significantly decreased from the 40-year highs of 2022, when gasoline prices surpassed $5 per gallon and home values skyrocketed by double digits, the cumulative price increase from January 2020 to November of this year was 22.2%, as indicated by the latest Consumer Price Index, which monitors changes in the prices of commonly bought goods and services. After raising interest rates to a 23-year peak, the Federal Reserve began to lower them in September; however, officials have mentioned in recent statements that borrowing costs continue to affect certain sectors of the economy. Fed officials have also indicated that they are not in a hurry to reduce borrowing costs.

Many Americans are still facing hardships: nearly 30% of all U.S. households this year reported spending more than 95% of their disposable income on essentials such as housing, groceries, and utilities, according to a Bank of America Institute report, an increase from 2019 levels. For households with annual incomes below $50,000, this figure is even higher, at around 35%. "Lower-income households will always bear the brunt of high inflation and high interest rates," said Elizabeth Renter, a senior economist at NerdWallet.

Wage growth finally began to exceed inflation in early 2023, with the lowest-income U.S. households experiencing the second-fastest wage growth, as per data from the Atlanta Fed. However, their earnings have since slowed significantly, lagging behind the wage growth of the wealthiest Americans as of November. Companies offering affordable goods and staple items, such as Ross Stores, Dollar General, and Walmart, have benefited from the increased demand from cost-conscious consumers. Walmart reported higher-than-anticipated revenue for the first quarter of the year, and Dollar General noted an increase in customer traffic. Retailers have also observed indications of financial strain among lower-income consumers.

"If you listen to the earnings reports from some retailers who cater significantly to low- and moderate-income individuals, they uniformly indicate that people are under financial pressure," Fed Chair Jerome Powell stated at a recent event in New York. Should Trump proceed with imposing a 25% tariff on imported goods from Canada and Mexico, along with an additional 10% duty on Chinese goods, prices could rise by 0.75% next year, according to an estimate by economists at the Yale Budget Lab. This would equate to a loss of approximately $1,200 in annual purchasing power per household, in 2023 dollars, as per the estimate. However, prices could increase slightly less if Americans opt for domestically produced goods or goods from countries with lower tariffs.

Nevertheless, a high-inflation scenario would likely differ from the most recent one that emerged in 2021, which was primarily driven by pandemic-induced demand and supply chain disruptions, according to economists. This time, Americans will not have the support of savings accumulated during the coronavirus pandemic and benefits from pandemic-era programs that have now expired, such as an extension of the child tax credit and free school lunches. "Households are not in as good a shape as they were immediately following the pandemic, but we're discussing a different inflation scenario," said Shannon Grein, an economist at Wells Fargo. "You can view tariffs as one-time price adjustments. Companies won't keep increasing their prices month after month due to new tariffs, unlike the supply and demand imbalances during the pandemic."

Still, low-income households would be significantly impacted in this scenario, Grein noted. "Next year, we're likely to have an environment where spending is positive, it's slowing, but it's masking many of these vulnerabilities that are coming to the forefront and affecting the lower-income segment dealing with inflation and rates to a much greater extent," she said.