A new report from the Federal Reserve Bank of New York has found that U.S. companies and consumers bore nearly 90% of the economic burden from tariffs imposed during the Trump administration in 2025, highlighting that the costs are largely domestic rather than shifted to foreign exporters. This finding challenges assertions that tariffs are paid by other countries and underscores the direct impact on American households and businesses through higher prices.
The New York Fed’s research, released recently, indicates that the average tariff rate on imported goods surged to 13% in 2025 from just 2.6% at the start of the year, primarily due to policies targeting countries like China, Mexico, Canada, and the European Union. Analysts concluded that U.S. importers absorbed 90% of these increased costs, with exporters from abroad maintaining their prices rather than lowering them to compensate. This pass-through effect means that American firms, facing higher expenses for imported materials, have raised prices for consumers, contributing to inflationary pressures.
Exporters’ responses were consistent with patterns observed in 2018, when similar tariffs were first implemented. During that period, prices for consumers rose without significant economic benefits, as noted in prior Fed analyses. The current study aligns with this trend, suggesting that tariff policies have repeatedly failed to shift costs onto trading partners. Instead, foreign companies often reduce trade volumes rather than cut prices, leading to a collapse in certain imports without alleviating the financial strain on U.S. entities.
Corroborating evidence comes from independent research institutions. The Kiel Institute for the World Economy in Germany reported a ‘near-complete pass-through of tariffs to U.S. import prices’ after analyzing millions of transactions, noting that countries like Brazil and India did not lower prices. Similarly, the National Bureau of Economic Research found that the pass-through was almost 100%, reinforcing the New York Fed’s conclusions. These studies indicate a global consensus that tariffs are effectively a tax on American purchasers.
The Tax Foundation, a Washington-based think tank, quantified the impact, estimating that increased tariffs in 2025 cost the average U.S. household approximately $1,000, with projections rising to $1,300 in 2026. This has elevated the effective tariff rate to 9.9%, the highest since 1946, according to the foundation. Such costs are likely to offset any economic benefits from tax cuts included in recent legislation, such as Trump’s ‘Big Beautiful Bill,’ potentially negating gains for consumers.
The implications extend beyond immediate financial burdens, affecting broader economic trends. Consumer spending has shown signs of slowing, as higher prices for goods may deter purchases, while businesses face squeezed profit margins. The New York Fed’s report adds to concerns about trade policy’s role in shaping economic stability, particularly as the U.S. navigates ongoing negotiations and potential future tariff adjustments.
Moving forward, policymakers and economists are likely to debate the efficacy of tariffs as a tool for economic strategy. The New York Fed’s findings suggest that without changes, American consumers and firms will continue to shoulder the majority of costs, influencing discussions on trade agreements and domestic economic measures. This report underscores the need for a nuanced approach to international trade that considers the direct impacts on the U.S. economy.
