Households May Be Paying a “Trump Chaos Tax” of as Much as $210 per Month in Added Interest—and the President Needs Someone to Blame
By Seth Frotman and Julie Margetta Morgan | September 11, 2025
It’s been a wild few weeks for our central bank. A softening labor market makes a strong case for long-awaited rate cuts, even as today’s rising inflation data may demand further caution.
In the background, Trump’s demand for lower rates looms large. First, Trump took the unprecedented step of publicly pressing Fed Chair Jay Powell on rates, even floating Powell’s removal, before walking it back. As the Fed continued to signal a “wait and see” approach to rate cuts, Trump illegally attempted to fire Fed Governor Lisa Cook on dubious charges of mortgage fraud.
Monetary independence is very much in question now—some argue it’s already too far gone—and the folks auditioning for Powell’s spot are trying hard to flirt with the line between neutrality and political control of the dollar.
Of course, this isn’t about Lisa Cook’s mortgage application or the Fed’s building renovations. In reality, Trump and his allies are targeting the Fed because they think it has the power to blunt some of the massive harm Trump has inflicted on Americans’ household budgets.
Trump and Republicans in Congress have rolled out a chaotic and reckless economic agenda over the past few months—tariffs, tax giveaways for the wealthy, and more. Households across America have been paying the price for that chaos.
Below, we estimate that a working-class household could be paying a “Trump Chaos Tax” of as much as $210 per month in extra interest on household debt, all because Trump’s failed economic policies have kept rates higher.
Let’s start from the top:
Americans have a ton of household debt. Over $18 trillion of it. That includes mortgages, credit cards, student loans, auto loans, and more.
For many of these loans, what people pay each month depends in part on decisions made at the Fed. In particular, the Fed carries out monetary policy (that is, it does the work of trying to keep the value of the dollar relatively stable) by controlling the “federal funds” rate. The federal funds rate is more or less the interest rate on nearly risk-free loans that banks make to each other overnight. The rate on these loans serves as a baseline for interest rates on other loans throughout the economy. And when that baseline goes up, the cost of many other loans—including mortgages, credit cards, and more—goes up too. (As we’ll get to, those rates also sometimes by even more than they should due to greedflation).
Here’s an example. We all remember when the Fed hiked the federal funds rate from nearly zero to 5.5 percent when inflation spiked a few years ago. Consider a family that had taken out a home equity line of credit (HELOC) to pay for their kid’s college expenses, in addition to any other loans that family may have. During the rate hike, the prevailing interest rate on a home equity line of credit rose from 4.14 percent to 10.09 percent. If that family took on an average-sized HELOC and was already in the standard twenty-year repayment window, the Fed’s rate hike would have produced a $162 jump in monthly payments (a more than 50 percent increase). That’s $162 going from the family to a lender just on one loan, without any additional benefits whatsoever for that family.
For fixed-rate loans, this relationship means that the timing of the exact moment when people need to borrow can make a huge difference in the cost of their debt. Those who took on a fixed-rate mortgage at 6 or 7 percent in the last few years will have to pay to get a rate decrease in the future through refinancing, or else continue to pay a higher rate than neighbors who borrowed at a more advantageous time. For those with variable rate loans, like an adjustable rate mortgage, a credit card, or a private student loan, they’re along for the ride with their lender—which generally means that when the federal funds rate goes up, their rates rise quickly, and when it falls, banks drag their feet when passing the savings on to their customers.
And many Americans don’t have just one loan or even one credit card. Higher interest rates means they’ll also pay more on the private student loan they also took out for college tuition, the credit card they took out for a medical procedure, and the amount they pay each month for the car they use to get to work. All of these costs have risen dramatically and in unison. The result is even more financial stress as families struggle to make ends meet at the end of each month.
Before Trump, the situation was improving.
In a signal that it felt inflation was cooling, the Fed began cutting interest rates in 2024, ultimately reducing the federal funds rate by a full percentage-point through the year’s end. When those cuts began, the Fed predicted there would be four additional rate cuts in 2025, and the agency appeared on track to make additional cuts through 2026. These moves would have offered critical breathing room for cash-strapped families, who had already mostly exhausted cash savings generated during the peak of COVID lockdowns.
But then Trump won the election, promising chaos, tariffs, and brazen tax giveaways that robbed working families while enriching the wealthiest. Responding to the uncertainty these policies would bring, the Fed paused interest rate cuts in January 2025. And as the reality of Trump’s policies has proven even worse than we might have feared, the Fed has maintained its pause on cuts. The connection between the rates and Trump’s economic policies is not speculation—Jay Powell has made it crystal clear that tariffs, as a driver of inflation, are a key reason why rates have remained high and may come down more slowly.
Trump’s chaos is squeezing families on both ends. Not only is the cost of basic goods going up because of tariffs and Trump’s disastrously designed trade war, but also the cost of the debts they carry has remained persistently high. Taken together, Trump’s chaos translates to a real, measurable “tax” on working families.
Let’s do some math on what Trump’s Chaos Tax could cost a typical household:
Imagine the Fed had remained on its pre-election trajectory. At the time, people’s best guess was that the federal funds rate would continue dropping down to 3.5 percent by May 2025, instead of stagnating at 4.5 percent where it is now. That seemingly small decrease could have had huge effects for households.
Consider, for example, a working-class household that has relied on various different kinds of variable rate credit. This family could—right now—be saving about $210 per month just in interest charges if Trump’s failed policies hadn’t led interest rates to remain high:
| Actual Payment | Alternative Payment | The Trump Chaos Tax (monthly) |
| ARM | $1585.81 | $1,426.82 | $158.99 |
| HELOC | $359.58 | $333.57 | $26.01 |
| PSL | $445.03 | $426.09 | $18.94 |
| Credit Card | $135.48 | $131.07 | $4.41 |
| Total | $208.35 |
Think about what that means. That’s $210 that people could have spent on food, housing, medical bills and more. It’s also $210 that people could have spent on school supplies, or at small businesses in their communities.
Instead families are sending this money to Wall Street.
Assuming the gap between what has been and what could have been held steady from inauguration day through September, that’s nearly $1500 that an American household could have enjoyed for their own benefit—not paying to lenders in an unnecessary Trump Chaos Tax. And for many people, these cost increases will compound well beyond 2025.
To be sure, this isn’t the only reason Trump has declared war on the Fed and it remains to be seen just how high rates will remain and for how long. But for families paying the Trump Chaos Tax, this is background noise. In Donald Trump’s economy, working people are paying a real, immediate financial penalty for his economic mismanagement. This is happening right now and it isn’t going away any time soon.
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Seth Frotman is a Senior Fellow at the Center for Consumer Law and Economic Justice at UC Berkeley Law School and Julie Margetta Morgan is the President of the Century Foundation. Both served on the senior staff of the Consumer Financial Protection Bureau until 2025.
This blog was also published on In Debt, a Protect Borrowers Substack.