Who Really Pays for U.S. Tariffs? Nearly 90% Hits Americans

In 2025, U.S. trade policy grabbed a lot of headlines as tariff rates on imported goods spiked sharply. According to a new study from the Federal Reserve Bank of New York, the average tariff on U.S. imports jumped from 2.6% to 13% during the year a huge change that raised serious questions about who actually ends up paying when Washington slaps tariffs on foreign goods.

At first glance, tariffs might sound like a tool that forces foreign companies to pay a price for selling into the U.S. But the data tells a different story. The New York Fed researchers found that nearly 90% of the economic burden of those tariffs known in economics as the tariff incidence fell on U.S. companies and consumers rather than on foreign exporters. That means Americans, not overseas producers, have ended up footing most of the bill.

Economists measure the burden of a tariff by looking at how much of the tax gets passed through to prices here at home. If foreign firms lower their prices to offset the tariff, they will absorb more of the cost. But in 2025, import prices for U.S. buyers stayed high. During the first eight months of the year, U.S. consumers and businesses absorbed 94% of the tariff costs, and even by November that figure still sat at 86%, according to the report.

Other research supports this conclusion. The Kiel Institute for the World Economy estimates that U.S. importers and consumers shouldered an astonishing 96% of tariff costs, with foreign exporters absorbing just a tiny share. These findings contradict repeated statements from political leaders claiming tariffs would make foreign producers pay more. Instead, economists say tariffs function a lot like a consumption tax on goods Americans buy raising prices for everyday shoppers and squeezing corporate profit margins at home.

There’s also broader evidence that tariffs shifted trade flows without dramatically shrinking the overall trade deficit. Even as average tariff rates climbed, total U.S. trade imbalance barely budged in 2025, with deficits falling modestly with some partners like China but widening with others such as Vietnam and Mexico. Meanwhile, revenue from customs duties surged. One analysis found that tariffs generated hundreds of billions of extra dollars in federal revenue above recent historical norms, though what that means for consumers’ wallets is a separate question.

Not surprisingly, these academic findings have stirred political debate. Some administration advisers have slammed the New York Fed study as flawed and called for penalties against the researchers, arguing that it overstated the burden on Americans. But independent researchers and institutions broadly agree that most tariff costs are passed on to U.S. buyers, not foreign sellers.

In everyday terms, this all means that when you see prices tick up on furniture, tools, electronics, or other goods part of that increase can be traced back to the costs companies faced with tariffs being included in prices at checkout or on business expense reports. And the bulk of that tax burden has landed squarely on U.S. soil.