It’s Time to Start a Tariff Emergency Fund

The only thing that’s certain about the current tariff situation is that a lot of things are about to get more expensive for U.S. consumers. The impact of the new tariffs is estimated to be more than $5,000 per year for the average household, which means all the work you’ve put into figuring out your home budget and personal finances is going to go out the window. All the metrics are about to change—and mostly not in your favor.

If you’re smart, you already have an emergency fund to protect yourself against life’s little surprises, from a job loss to an unexpected medical bill. Right now, it's also a good idea to start building a fund to protect yourself against sudden and persistent tariff-fueled hikes in the cost of living. Here’s how to approach setting up a tariff emergency fund.

How to estimate what tariffs will cost you

Tariff rates are public information, but tariff schedules can be a difficult read if you’re not an economist. But you can use a few key pieces of information to figure out how much extra money to set aside to protect yourself from tariff-related cost increases:

• Blanket tariffs. There’s pretty much a base tariff of 10% on just about every country in the world at the moment (the big exception is China, which currently faces tariffs as high as 145%). You can see a list of countries and tariff rates here, so if you know that something you buy is being imported from a specific place, you can see the extra cost imposed on the importer for that country of origin. This is a good upper metric to go by.

• Average cost increase. Most companies will pass tariff costs on to the consumer in some way—that’s why tariffs are considered a form of tax on the consumer. That doesn’t necessarily mean that everything will be 10% more expensive due to the blanket tariffs, because a product may only use a few ingredients or components that are subject to the tariffs, and different ingredients might come in under different tariff rates. The Budget Lab at Yale University has calculated that consumer prices are going to go up by about 3% as a result of the tariffs, so that’s a good lower metric to use.

How to create your tariff emergency fund

You could spend time researching tariff rates and where your food, clothing, and other items come from in order to craft an extremely specific tariff fund, and then look for domestic products you can substitute to eliminate the tariff costs from your budget. But the way the tariffs are shifting on a near-daily basis means you might do better to skip that meticulous product-by-product analysis and just assume that your costs are going to go up by anywhere from 3% to 10% on just about everything.

Assume a blanket increase

Targeting something in the middle of that range—say, 5% of your current household grocery and shopping costs—should give you the extra padding you’re going to need as long as these tariffs remain in place. For example, if your average grocery bill is about $500 per month, a tariff emergency grocery fund of about $180 (3% of $500 is $15, multiplied by 12 months) would cover a year’s worth of extra tariff-related costs (or you could try to find a supermarket that’s not raising prices at all, if you can). If you want a little more protection against unexpected costs, you could go the full 10% and make that $300. You can apply a similar formula to everything else you purchase on a regular basis that could be impacted by tariffs.

Budget for the big ticket items

Another option is to consider major purchases you're planning for—say, a new refrigerator or a home remodeling project—and setting aside extra money to cover possible increased costs. Consumer Reports estimates appliance prices could increase by as much as 30% to 40% over the next 9 months, so you'll want to be ready: If you were planning on buying a refrigerator with a price tag of around $2,000,.stick another $600 to $800 into your tariff emergency fund.

Just set aside $5,000

Another approach would be to assume the tariffs will cost you about $5,000 per year, and start putting that amount aside to cover the increased costs, if you can manage it. It’s important that this be a separate amount from your emergency fund, which you still need to maintain to hedge against, well, emergencies—and if tariffs are lowered or you don't spend as much as you expect, you can roll it into next year's fund, or add it to your regular emergency fund.

Preparing for tariff chaos isn’t going to be easy, but putting aside some extra money now will give you the necessary runway to handle what’s coming.