US firms and consumers bear 90% of tariff costs, not foreigners as Trump says – Firstpost

A fresh study by the Federal Reserve Bank of New York has delivered a rebuttal to US President Donald Trump’s oft-repeated claim that foreign exporters are paying for America’s tariff hikes.

The report finds that nearly 90 per cent of the economic burden from last year’s surge in import duties was borne by US firms and consumers—not overseas producers.

Tariff surge and the headline rate

According to the New York Fed economists, the average US tariff rate climbed from 2.6 per cent at the start of 2025 to 13 per cent by December. Duties spiked sharply in April and May, including a 125-percentage-point increase on Chinese goods before a partial rollback later in the year.

While the statutory tariff rate settled at 13 per cent by year-end, the effective duty rate—measured as total tariff revenue relative to import values—was lower. Exemptions and sourcing shifts helped cushion the blow on paper.

For instance, even though the US imposes a 35 per cent tariff on certain Canadian imports, a large share of those goods entered duty-free under the United States-Mexico-Canada Agreement.

Companies also reconfigured supply chains to sidestep higher-tariff jurisdictions.

China’s share of US non-oil imports, which was nearly 25 per cent in 2017, fell to about 15 per cent by 2024 and slipped below 10 per cent in the first eleven months of 2025. Mexico and Vietnam gained market share as importers diversified sourcing.

Who actually pays

At the core of the debate is “tariff incidence”—the extent to which costs are absorbed by foreign exporters versus domestic importers.

Although tariffs are collected from US importers at the border, the burden can shift abroad if foreign producers cut export prices to remain competitive. The New York Fed’s product-level analysis through November 2025 suggests that such price adjustments were modest.

Between January and August 2025, 94 per cent of the tariff burden was passed on to US importers, with foreign exporters absorbing just 6 per cent. The share borne by US firms moderated slightly later in the year: importers absorbed 92 per cent in September and October, and around 86 per cent in November.

Even in November, when foreign exporters absorbed a somewhat larger slice, a 10 per cent tariff translated into only a 1.4 per cent decline in export prices. With the average tariff at 13 per cent in December, the study estimates that US import prices for affected goods were roughly 11 per cent higher than those not subject to duties.

The researchers conclude that “US firms and consumers continue to bear the bulk of the economic burden of the high tariffs imposed in 2025.”

Political and legal crosscurrents

The findings come at a sensitive juncture for Trump’s trade strategy, which hinges on tariffs as a tool to reshore manufacturing and boost federal revenues.

In Washington this week, lawmakers voted to rescind emergency tariffs on Canadian imports—a largely symbolic but politically pointed challenge to the president’s use of executive authority in trade.

Meanwhile, the Supreme Court of the United States is expected to rule on the legality of several tariffs imposed under emergency powers. An adverse verdict could significantly alter the trajectory of US trade policy and blunt a key pillar of the administration’s economic agenda.