Who Is Really Paying For Trump’s Tariffs?

President Trump introduced massive new tariffs on nearly every other country in the world in April 2025, in many cases as “punishment” for trade barriers to U.S. exports he alleged them to have set up. Among other things, he promised the tariffs would be great for the U.S. economy. Today, in hindsight, who really ended up bearing the brunt of them? According to a recent analysis by the New York Federal Reserve Bank (NY Fed), it was primarily U.S. firms and consumers.

The researchers’ methodology started by calculating the average duties paid divided by the value of all imports each month last year. They chose duties actually paid rather than the average tariff rate because there are many exemptions from the tariffs. For example, despite an 85% tariff rate imposed on imports from Canada last year, under the U.S.-Mexico-Canada Agreement 83% of those imports were excluded.

The analysis revealed that the average duty rate at the beginning of 2025 before the imposition of Trump' s tariffs was 2.6%. By the end of the year, it had skyrocketed to 13%.

The NY Fed researchers next looked at the way global supply chains shifted in response to the higher tariffs. They found that from 2024 to 2025 China’s share of U.S. imports had dropped from nearly 15% to under 10%. Vietnam and Mexico, on the other hand, had gained U.S. market share.

Lastly they calculated the tariff incidence, the degree to which the costs of a tariff are split between foreign exporters and domestic importers. Although it’s always importers that pay the duties, the exporters might choose to lower their prices to avoid losing market share. If the exporters do not drop their prices at all, the importers (U.S. businesses and consumers) would end up absorbing all the costs. If foreign prices are lowered by an amount equal to the tariffs, it would be the exporters who effectively pay 100% of the costs. The tariff incidence is mixed when exporters lower prices by some amount but not enough to cover the duties imposed on the importers.

The analysts regressed the twelve-month percentage change in foreign export prices against the twelve-month percentage change in tariffs. They also controlled for average price changes of various products across all countries as well as for changes in the average price of imports into any country in any month in order to isolate the specific effects of the U.S. tariffs. 

What they found is that from January through August of last year 94% of the tariff incidence was borne by the U.S. That number began to drop as importers began to readjust their supply chains as indicated above. But by November the U.S. was still shouldering 86% of the burden of Trump’s tariffs.

On February 20, 2026 the U.S. Supreme Court invalidated the tariffs Trump justified through the International Emergency Economic Powers Act. In consequence Trump has authorized a new round of tariffs under a different law. If our experience with Trump’s first round is any indication, American businesses and consumers are likely to have to pay the price once again. 

Here’s a link to the study:

https://libertystreeteconomics.newyorkfed.org/2026/02/who-is-paying-for-the-2025-u-s-tariffs