A newly released analysis from the Federal Reserve Bank of New York indicates that American households and companies bore the majority of the costs from tariff increases imposed in 2025, contradicting assertions by President Donald Trump and some administration officials that foreign exporters would shoulder the burden.
According to the report, which uses customs and trade data through November 2025, nearly 90% of the tariff burden fell on U.S. firms and consumers. That includes 94% of costs from January through August, sliding to 86% by November as foreign exporters absorbed a slightly larger share late in the year.
Tariff Increases and Economic Incidence
Over the course of 2025, average U.S. import tariff rates rose sharply—from around 2.6% to 13%—as a result of broad new levies on imported goods. The increased tariffs were part of a trade policy aimed at reducing trade deficits and encouraging domestic production.
Economists use the term “tariff incidence” to describe who ultimately pays for tariffs. While the importer is legally responsible for paying duties to the U.S. government, the economic incidence depends on how much of that cost is passed through to buyers via higher prices versus absorbed by foreign sellers through lower export prices.
The New York Fed’s analysis found minimal price reductions by foreign exporters, meaning most of the tariff costs were reflected in higher import prices that U.S. businesses and households ultimately pay.
Implications for Consumers and Firms
The study’s findings contradict claims from the Trump administration and advisers asserting that foreign producers or middlemen were paying tariff costs. Instead, the data suggest that American entities continue to shoulder the bulk of the economic cost tied to these trade measures.
Many businesses passed a significant portion of their increased tariff costs on to consumers through higher prices, while some firms absorbed part of the costs by reducing profit margins.
Broader Trade and Policy Context
The debate over who pays tariffs is central to broader policy discussions about trade, inflation, and economic growth. Supporters of higher tariffs argue they protect domestic industries and can lead to job creation. Critics counter that tariffs function as taxes on imports that can dampen consumer purchasing power and drive up costs for businesses reliant on international supply chains.
Concurrently, legal questions surrounding the authority to impose broad tariffs under presidential emergency powers are expected to be addressed by the U.S. Supreme Court in an upcoming decision, which could affect the future of trade policy.
The Federal Reserve Bank of New York’s analysis has provided detailed evidence that Americans—through both consumers and businesses—paid the vast majority of tariff costs in 2025. This data challenges public assertions that foreign nations bore these costs and highlights the complexities policymakers must consider when using tariffs as an economic tool.
More about tariffs:
Staff Report
Staff Report
Staff Report
