Americans Bear the Bulk of Trump’s Tariff Costs,
Study Finds
Research from the New York Fed confirms
that U.S. companies and consumers are bearing tariff costs, despite the
president’s assertions otherwise.
1.
Study Findings:
Research by the Federal Reserve Bank of New York and Columbia University shows
that 90% of tariff costs through November 2025 were borne by U.S. companies
and consumers, not foreign exporters.
2.
Tariff Incidence Explained:
o
Importers (often U.S. companies) initially pay
tariffs to the U.S. government.
o
These costs are typically passed on through higher
consumer prices or absorbed by firms via lower margins.
3.
Contradiction to Trump’s Claims:
o
Donald Trump has repeatedly argued that foreign
producers would absorb tariff costs.
o
In a The Wall Street Journal op-ed (Jan. 30), he
claimed the burden fell “overwhelmingly on foreign producers.”
o
The study suggests this interpretation was largely
incorrect.
4.
2025 Data Highlights:
o
From January–November 2025, most tariff costs fell
on Americans.
o
In the first eight months of 2025, 94% of tariff
costs were borne domestically.
o
Even by November, 86% of the burden remained in the
U.S.
5.
Comparison to First Term:
o
Earlier research on Trump’s 2018–2019 tariffs also
found costs were fully passed on to American businesses and consumers.
6.
Impact on Businesses:
o
Large companies managed better by:
§ Negotiating
supplier discounts
§ Diversifying
supply chains
§ Stockpiling
goods before tariffs took effect
§ Temporarily
accepting lower profit margins
o
Small businesses faced greater strain due to:
§ Limited
bargaining power
§ Thinner
margins
§ Greater
need to raise consumer prices
7.
Shift in Trade Patterns:
o
China’s share of U.S. imports declined further.
o
Imports from Mexico and Vietnam increased to
compensate.
8.
Price Effects:
o
Average U.S. tariff rate rose from 2.6% to 13%
over the year.
o
Import prices increased by an estimated 11% due
to tariffs.
o
Overall price impact has been less dramatic than
some economists feared.
9.
Future Outlook:
o
Some tariff effects were delayed due to pre-tariff
inventory stockpiling.
o
As inventories deplete, cost pressures may
intensify.
o
Foreign suppliers began absorbing a slightly larger
share late in the year, but the U.S. still bears most of the burden.
Conclusion:
Despite political claims, economic evidence indicates that American firms and
consumers continue to shoulder the majority of tariff costs.
President
Trump has frequently claimed that foreign countries were paying for his
tariffs, not Americans. But as economists predicted, that is largely turning
out not to be the case.
Research
published on Thursday by economists at the Federal Reserve Bank of New York and
Columbia University suggests that, through November 2025, 90 percent of the economic
burden of the president’s tariffs fell on U.S. companies and consumers.
The
economists reviewed the “incidence” of the tariffs — who ultimately pays the
cost of new import taxes. When a good is brought into the country, the importer
of record, often an American company, is first responsible for paying the
tariff to the U.S. government. But the importer can pass that cost on to others
by raising the prices it charges its customers, or by negotiating more favorable contracts with its suppliers.
Mr.
Trump and his advisers have said the cost of tariffs would be shouldered by
foreign suppliers. They believed that foreign companies would respond to
tariffs by reducing their prices, to maintain their access to the large and
important U.S. consumer market.
In
an op-ed in The Wall Street Journal on Jan. 30 defending his tariffs, Mr. Trump
wrote, “the data shows that the burden, or ‘incidence,’ of the tariffs has
fallen overwhelmingly on foreign producers and middlemen, including large
corporations that are not from the U.S.”
“In
many cases, nations that are heavily dependent on exports have had no choice
but to ‘eat’ the tariffs to avoid even worse losses from their excess
capacity,” he added, appearing to incorrectly interpret some statistics.
Although
data shows foreign suppliers react to tariffs by reducing their prices in some
instances, economic research suggests that is not the most common response.
The
New York Fed study found that, from January 2024 to November 2025, the bulk of
the tariff costs fell on U.S. firms and consumers. In the first eight months of
2025, 94 percent of the tariff incidence was borne by the United States, they
said.
“In
sum, U.S. firms and consumers continue to bear the bulk of the economic burden
of the high tariffs imposed in 2025,” the study found.
The
same researchers studied the effect of tariffs in Mr. Trump’s first term, where
they found that tariffs in 2018 and 2019 were wholly passed on to American
businesses and consumers.
Businesses
across the country have spent the last year trying to navigate Mr. Trump’s
changing tariff policies. Larger companies have generally been able to handle
the higher import duties without raising prices significantly on consumers.
In
some cases, their size helped them to negotiate discounts with suppliers who
rely on their business, helping to offset the cost of the tariffs. Because they
often have a more diversified roster of suppliers, they could more easily shift
production to countries that carried lower tariff rates.
China’s
share of U.S. imports — which slumped when Mr. Trump waged a trade war on the
county in his first term — fell further last year. But U.S. imports from Mexico
and Vietnam increased to help make up the difference.
But
many bigger companies stockpiled inventory before the tariffs took effect,
allowing them to keep prices relatively stable. Some have also accepted smaller
profit margins in the hopes that the Trump administration would reach more favorable trade deals eventually.
For
smaller businesses, tariffs have been a bigger drag. Many did not have the
clout to arrange deals with foreign suppliers. Because they typically operate
with smaller profit margins, they couldn’t swallow the additional expenses for
long. Some had to raise prices on consumers or risk going under.
Still,
the impact of tariffs has been smaller than many economists anticipated, in
part because many companies feared that raising prices would drive away
customers. Tariffs have lifted prices on some imported goods, but for the most
part, prices have not ballooned.
Who
bears the brunt of the tariffs could evolve. Many companies delayed some
shipments as they worked through pre-tariff inventory, pushing off the tariffs’
costs and allowing them to defer some decisions about how to manage the
additional duties. As stockpiles become depleted, avoidance will no longer be
an option.
The
researchers at the New York Fed found that foreign suppliers started to bear a
greater proportion of the tariff costs by the end of the year, likely as U.S.
companies began renegotiating their contracts. Still, in November, 86 percent
of the tariff cost was still passing through to the United States.
Over
the year, the average tariff rate on U.S. imports rose to 13 percent from 2.6
percent, the economists said, spiking in April and May as Mr. Trump applied
tariffs to exports from foreign countries, including China. Their findings
imply that, overall, U.S. import prices for goods rose 11 percent because of
the tariffs.