Key points
- A New York Fed study finds that roughly nine in ten dollars of the 2025 tariff increases were ultimately shouldered by U.S. firms and consumers, not foreign exporters.
- Pass-through was highest early in 2025 (about 94% in the first eight months) and eased toward November (about 86%), as some foreign exporters lowered their export prices.
- The average U.S. tariff rate jumped from ~2.6% to ~13% during 2025; import-price effects were concentrated on goods subject to the new levies.
- The study’s findings align with several other research notes (CBO, Bloomberg, FT, Investopedia analyses) that find large domestic incidence from tariff policy.
- Bottom line for businesses and households: expect higher input costs, potential retail-price increases, and greater pressure on budgets — even when White House messaging emphasizes foreign burden or tariff revenue gains.
What the study actually did — plain language
The report, by staff economists at the Federal Reserve Bank of New York and a co-author at Columbia, used monthly trade and price data through November 2025 to compare changes in foreign exporters’ prices with changes in U.S. tariff rates for specific goods. The method isolates the “pass-through” of tariff changes onto import prices: if foreign exporters cut their export prices, they absorb part of the tariff; if they don’t, U.S. buyers (importers and ultimately consumers) pay more. The authors find that about 86–94% of the tariff increase was passed through to U.S. import prices over different months of 2025.
Why that matters to your wallet and your business
Tariffs are often described politically as a tax on foreign producers — but economics is less forgiving: prices adjust through channels. The New York Fed’s headline number means:
- Retail prices for tariffed goods or for goods with tariffed inputs likely rose, squeezing household budgets.
- U.S. firms that rely on imported inputs saw costs increase; some passed those costs to customers, some squeezed margins, and some reorganized sourcing.
- Tax-revenue effects are real: customs collections surged (government receipts from duties rose substantially in 2025), but those collections came with higher costs for domestic economic actors.
The numbers that jump off the page
- Pass-through: ~94% (first eight months of 2025) → ~86% (November 2025).
- Average tariff rate: rose from ~2.6% to ~13% across 2025 (weighted average on U.S. imports).
- Customs revenue: hundreds of billions collected in 2025, a large year-over-year increase as duties spiked.
(Each figure above is drawn from the New York Fed report and corroborating coverage in major outlets.)
Two ways to interpret the results — policy vs. pocketbook
- Policy lens: Tariffs raised government receipts and may have encouraged some reshoring and supply-chain diversification away from China. Supporters will point to increased customs revenue and targeted industrial benefits.
- Distributional lens (who paid): The New York Fed’s accounting is blunt: most of the economic burden landed on Americans — consumers through higher prices and firms through higher input costs — not on foreign exporters. That undercuts political claims that “other countries paid” for the levies.
Note: there are dissenting/more nuanced takes from policymakers and some Fed officials who emphasize limited inflation pass-through or different time horizons; the evidence is complex and depends on product mix and supply-shift responses.
Practical takeaways — what firms and consumers should do now
For small and mid-sized businesses
- Re-benchmark supplier contracts: include tariff pass-through clauses or renegotiation points.
- Run scenario stress tests (input-cost shocks of +10/ +25 / +50%) to see margin impact.
- Consider diversifying suppliers (nearshoring to Mexico, Vietnam, etc.) but quantify switching costs — the study found supply shifts did accelerate post-tariff.
For consumers
- Expect some categories (electronics components, certain apparel, steel/aluminum inputs) to show quicker price moves. Shop sales, compare unit prices, and favor retailers that disclose import origins or have buffered price policies.
For investors and analysts
- Revisit margin forecasts for firms with heavy import reliance. Tariffs are a non-negligible input shock to profit modeling and consumer-spending assumptions.
Quick Q&A
Q: Didn’t the administration say foreign producers paid the tariffs?
A: Political messaging often frames tariffs as paid by exporters or as a transfer paid for by “other countries.” The New York Fed’s empirical work finds that, in practice, most of the 2025 tariff cost was passed through to U.S. firms and households. That’s a standard economic outcome when foreign suppliers have limited room to further lower export prices.
Q: Will tariffs necessarily cause long-run inflation?
A: Tariffs raise specific goods’ prices and can contribute to headline inflation, but the ultimate inflationary effect depends on monetary policy, supply adjustments, and whether producers absorb costs long-term or pass them on. The New York Fed study shows large short-run incidence on import prices but does not alone determine long-run inflation trajectories.
Bottom line
The New York Fed’s analysis delivers a clear punchline: the bulk of the economic cost from the 2025 tariff program was paid by U.S. firms and consumers. That finding matters for political debates, corporate planning, household budgets, and macroeconomic forecasting. Policymakers weighing tariff design should factor incidence and distributional consequences into their calculations — and businesses should treat tariffs as a material supply-chain risk, not a foreign tax.
Reporting note & sources: This article synthesizes the New York Federal Reserve staff report and coverage from Bloomberg, the Financial Times, Reuters, Investopedia and other outlets summarizing the study and its economic context.
Disclaimer: This article is informational and not legal, tax, or investment advice. For firm-specific decisions consult a licensed professional.