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The Federal Reserve Bank of New York has unveiled research highlighting that American businesses and consumers are shouldering the overwhelming costs of tariffs imposed during Donald Trump’s presidency. With average tariff rates skyrocketing from 2.6% to 13% by 2025, the economic impact is evident, as US companies and shoppers face a steep price hike on imported goods.
Tariff Costs Soar
According to the New York Fed’s latest findings, an astonishing 90% of the financial burden stemming from increased tariffs on imports from Mexico, China, Canada, and the European Union has fallen squarely on the shoulders of American consumers and businesses. The report states, “US firms and consumers continue to bear the bulk of the economic burden of the high tariffs imposed in 2025.”
As tariffs escalated last year, exporters did not reduce their prices to maintain demand in the US. Instead, they opted to keep costs stable, opting to pass the tariff expenses directly to importing companies. In turn, these companies raised their prices, which ultimately affected shoppers. This pattern reflects a consistent trend that began in 2018, when initial tariffs were introduced, resulting in increased consumer prices with minimal overall economic impact, as noted by the New York Fed.
Global Reaction and Economic Analysis
The implications of these tariffs are not just confined to domestic markets. Research from the Kiel Institute for the World Economy indicates a “near-complete pass-through” of tariffs to US import prices. An analysis of 25 million transactions revealed that exporters from countries such as Brazil and India opted against lowering their prices. Instead, they reduced the volume of goods shipped to the US, leading to a collapse in trade volumes rather than price adjustments.
Additionally, the National Bureau of Economic Research corroborated these findings, reporting that almost 100% of the tariff costs are ultimately borne by American consumers. This trend is echoed by the Tax Foundation, which categorised these tariffs as a de facto tax on consumers, estimating that the average household faced an additional $1,000 (£734.30) in costs in 2025, with projections of $1,300 for 2026. With the effective tariff rate now averaging 9.9%, the highest since 1946, the implications for consumer spending are profound.
Counterproductive Economic Measures
Despite the introduction of tax cuts under Trump’s “Big Beautiful Bill,” the Tax Foundation argues that the financial repercussions of increased tariffs negate any potential benefits. The rising costs associated with tariffs effectively cancel out the positive impact of tax reforms, placing a heavier financial strain on households.
In a political context, the US House of Representatives has taken steps to challenge Trump’s tariffs on Canada, signalling a growing dissent regarding these trade policies. Furthermore, companies like Ford have reported substantial financial hits due to tariffs, with the automaker estimating an additional $900 million burden last year.
Why it Matters
The findings from the New York Fed are a clarion call for consumers and policymakers alike, illustrating the far-reaching consequences of tariff strategies. As American households grapple with rising costs, the implications for consumer spending, inflation, and overall economic health could be significant. The data underscores the need for a reassessment of trade policies that disproportionately impact US consumers, highlighting the delicate balance between protecting domestic industries and ensuring affordable access to goods for the American public.
