U.S. businesses and consumers absorbed nearly 90% of the cost of tariffs imposed last year, according to new research from the Federal Reserve Bank of New York. The findings challenge claims that foreign exporters would bear the financial burden of the trade measures. While the share paid by overseas suppliers increased slightly toward the end of the year, the study concludes that the majority of the economic impact fell on American firms and households.
The report arrives amid legal and political scrutiny of the tariff regime, including pending court decisions and congressional efforts to reverse certain trade measures.
Tariff Pass-Through to Americans
Based on U.S. customs data, the New York Fed study found that 94% of tariff costs were passed through to U.S. importers and consumers during the first eight months of the year. That rate declined modestly to 92% in September and October and to 86% in November, suggesting foreign exporters absorbed a slightly larger share later in the year.
Despite that shift, researchers concluded that “the bulk of the tariff incidence continues to fall on U.S. firms and consumers.” The study did not specify how the burden was divided between companies and households.
Political and Legal Context
The findings come as the administration’s tariff policy faces mounting criticism. A Supreme Court ruling on the president’s authority to impose certain tariffs is expected soon. In Congress, several Republican lawmakers have supported legislation aimed at reversing tariffs on Canada, one of the United States’ key trading partners.
While the administration has argued that tariffs would primarily impact foreign exporters, some officials have acknowledged that domestic retailers and importers have experienced higher costs as duties increased to levels not seen in decades.
Inflation and Economic Effects
Although the majority of tariff costs were passed through to domestic buyers, consumer inflation has remained relatively contained. Price growth eased from 3% in January 2025 to 2.7% by December. Economists anticipate additional data will clarify whether the impact remains limited or intensifies as inventories accumulated before tariff implementation are depleted.
Some Federal Reserve officials suggest that price pressures may emerge gradually through 2026, while others view the tariff effect as a temporary shock rather than a sustained driver of inflation.
Rising Tariff Rates and Revenue
The average tariff rate on U.S. imports rose from 2.6% to 13% over the course of 2025. The higher duties generated substantial federal revenue, including $30 billion in January alone and $124 billion in the fiscal year to date, more than triple the comparable period the previous year.
Other research institutions have reached similar conclusions regarding pass-through rates, reinforcing the view that most tariff costs ultimately landed on U.S. buyers rather than foreign producers.
Conclusion
The New York Fed’s findings suggest that tariffs enacted last year functioned largely as a domestic cost rather than an external one. While exporters absorbed a growing portion late in the year, American businesses and consumers bore the majority of the burden. As legal and legislative debates continue, the economic consequences of the trade measures remain a focal point for policymakers and markets alike.
