Trump Said Foreign Countries Would Pay. Americans Got the Bill Instead

Hundreds of billions of dollars were collected at the border in 2025 in the name of a tariff revolution that was supposed to make other nations pay. The White House insisted – repeatedly – that China, the European Union, and other trading partners would absorb the cost. But three independent research institutions, including the Federal Reserve Bank of New York, looked at the actual data. Their finding was uncomfortable: most of the money came out of American wallets. Here is how the math worked, who got hit hardest, and what happens now that the Supreme Court has stepped in.

A tax at the border that China was supposed to pay – but didn’t

The mechanics of a tariff sound simple enough. A foreign company ships a product to the United States. An American importer receives it at the port and pays a customs duty to the U.S. Treasury – not the foreign country, but the U.S. Treasury. From that moment, the importer faces a choice: absorb the cost and watch profit margins shrink, or pass it down the supply chain. In industries with thin margins – retail, food, clothing – there is almost no margin to absorb. The cost moves forward, from importer to wholesaler to retailer to the customer standing at the checkout.

President Trump argued that foreign exporters would “eat” the tariffs to preserve their access to the American market. In theory, a seller desperate enough for U.S. customers might cut their export price to offset the duty. In practice, the Kiel Institute for the World Economy – a German research institution that analyzed over 25 million shipment records covering nearly $4 trillion in trade between January 2024 and November 2025 – found that foreign exporters reduced their prices by less than 1 percent when faced with a 25 percent tariff. The other 24 percent landed on U.S. buyers. The researchers concluded that 96 percent of the $200 billion surge in customs revenue collected in 2025 was, in their words, “a tax paid almost entirely by Americans.”

The Federal Reserve did the same math and got the same answer

The Kiel Institute was not alone. The Federal Reserve Bank of New York conducted its own analysis covering U.S. import data through November 2025. Its conclusion, published in February 2026, was that nearly 90 percent of the tariffs’ economic burden fell on U.S. firms and consumers. In the first 8 months of 2025 – when tariff rates spiked most dramatically, particularly on Chinese goods – the pass-through to American importers was 94 percent. By November, as some foreign exporters made modest price concessions, the figure had eased slightly to 86 percent. The directional finding did not change: American businesses and households absorbed the overwhelming majority of the cost. The White House responded by calling the paper “an embarrassment,” with National Economic Council Director Kevin Hassett saying its authors “should presumably be disciplined.” The New York Fed stood by its analysis.

The average effective tariff rate on U.S. imports rose from 2.6 percent at the start of 2025 to 13 percent by year’s end – the highest level since 1947, according to the Tax Foundation. Total customs revenue collected that year reached $287 billion, a 192 percent increase over the prior year, according to Penn Wharton Budget Model data.

$1,000 per household – and that is the conservative estimate

Translating aggregate tariff costs into per-household impact requires assumptions, and researchers used different methods – which is why the figures vary. The Tax Foundation, a center-right think tank focused narrowly on direct income losses in 2025, estimated an average household tax increase of $1,000. The nonpartisan Tax Policy Center put the average annual loss at $3,100. The American Action Forum, another center-right group, estimated $3,900. The Yale Budget Lab, using a broader methodology that factors in reduced product variety and substitution costs, estimated $1,700 per household annually under most scenarios and up to $4,900 under others. The midpoint of the four broadest estimates was roughly $4,000 – the figure cited repeatedly by Senate Minority Leader Chuck Schumer, who argued in April 2025 that Trump had never fully explained to voters that tariffs would raise their own costs.

The Penn Wharton Budget Model took the longest view. It projected that the cumulative lifetime cost for a middle-income household would reach $22,000 – a figure it said was twice the economic harm that would result from a revenue-equivalent increase in the corporate tax rate from 21 to 36 percent.

Grocery shelves, clothing racks, car lots: where the increases actually showed up

Abstract annual estimates become real at the store. Harvard Business School economists tracking individual retail prices found that imported items cost an average of 2 percent more by August 2025 than they had in October 2024 – but that figure understates the sector-level variation. The Center for American Progress, analyzing Bureau of Labor Statistics data against pre-tariff trends, found that clothing prices rose 14 percent, household furnishings 8 percent, and nondurable household goods such as cleaning supplies and toilet paper 5 percent. Food prices grew at their fastest monthly rate since fall 2022 in December 2025. Beef rose 16 percent over the course of the year; coffee – much of it imported from countries subject to tariffs – climbed nearly 20 percent. A typical supermarket shopping cart cost 5 percent more in December 2025 than it had a year earlier, according to one analysis.

Domestic goods were not immune. Researchers at Harvard Business School found that prices of domestically produced items that competed directly with imported goods rose nearly as much as the imported items themselves – a predictable outcome when foreign competition is priced out of the market and domestic producers gain pricing power they would not otherwise have. The St. Louis Fed estimated that tariffs contributed roughly 0.5 percentage points to annualized headline PCE inflation in the June-August 2025 period.

Lower earners paid proportionally more – as economists had warned from the start

Tariffs are regressive by design. Households with lower incomes spend a higher share of their earnings on physical goods – food, clothing, appliances, transportation – and a smaller share on services, which are largely untaxed by import duties. Wealthier households spend proportionally more on services, domestic real estate, and financial assets, which are unaffected by tariff policy. The Tax Foundation’s vice president of federal tax policy, Erica York, noted in public commentary that lower-income filers were, on average, worse off under the combined effect of the tariffs and the 2025 tax cuts, even as some higher-income households benefited from the tax side of the ledger. The top 1 percent saw a smaller proportional reduction in after-tax income than most other groups.

The Trump administration acknowledged one significant pressure point in November 2025, signing an executive order exempting more than 237 categories of food imports from the tariff regime – including coffee, beef, and oranges. Officials framed it as a strategic refinement. Critics called it an implicit concession that the administration’s own economists had warned about for months: tariffs on everyday consumer goods hit ordinary Americans fastest and hardest.

The Supreme Court intervened – and the math changed, somewhat

The legal architecture underlying the tariffs began to fracture in early 2026. On February 20, the Supreme Court ruled that the sweeping tariffs imposed under the International Emergency Economic Powers Act (IEEPA) – the legal authority Trump had invoked to impose country-specific rates on “Liberation Day,” April 2, 2025, and in subsequent rounds – were unlawful, finding that the president does not have the authority to impose open-ended emergency tariffs of that scope. The ruling did not eliminate all tariffs. A separate 10 percent baseline tariff is being maintained under Section 122, a statutory authority with a 150-day expiration clock, along with surviving Section 232 tariffs on steel, aluminum, and autos.

The Tax Foundation estimates that with the IEEPA tariffs gone, the average annual cost to a U.S. household drops from $1,000 to roughly $600 under the Section 122 regime – meaningfully lower, but still a net cost borne by consumers rather than foreign governments. The Penn Wharton Budget Model calculated that U.S. businesses that paid IEEPA tariffs may be owed refunds of up to $175 billion. That process has not yet begun.

The core mechanism that affected your wallet in 2025 has not disappeared – it has merely shrunk

American importers still pay duties at the border. Those duties still flow through supply chains to retail prices. If you bought clothing, furniture, a car, or a significant appliance in 2025, you almost certainly paid more than you would have without tariffs – not because a foreign government sent a check to Washington, but because the cost was built into the price tag. The Kiel Institute’s summary was blunt: “Whether through higher prices on imported goods, higher prices on domestically produced goods that use imported inputs, or reduced availability and variety of products, American households pay for the tariffs.”

With the Section 122 tariff currently set to expire after 150 days and multiple new Section 301 trade investigations underway targeting China, the EU, and a dozen other economies, the trade policy landscape remains in flux. What the data from 2025 made clear is that the question of who pays tariffs is not a political abstraction. It has a concrete answer: the person swiping their card at the register.

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