What Are Tariffs and Who Actually Pays Them?

The One-Sentence Version

A tariff is a tax on imported goods paid by American companies to U.S. Customs — not by foreign countries — and study after study shows that cost gets passed directly to you at the register.

What Is a Tariff, Actually?

A tariff is a tax on goods coming into the country. The mechanics are straightforward:

An American company orders products from overseas — steel from South Korea, electronics from China, wine from France
When those goods arrive at a U.S. port, U.S. Customs charges a tax based on the product type and country of origin
The American importer writes the check — to U.S. Customs, a U.S. government agency
The importer then decides: absorb the cost (cutting their own profit), or pass it to the next buyer in the supply chain — the distributor, the retailer, and eventually you

At no point in this process does a foreign government write a check to the U.S. Treasury. The tax is collected from American businesses on American soil.

What Trump Says vs. What the Data Shows

Trump’s claim

“Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens.” (Inauguration Day 2025)

In a January 2026 Wall Street Journal op-ed, Trump wrote that the tariff burden “has fallen overwhelmingly on foreign producers and middlemen.”

What the research actually found

Study	Who Pays?
Federal Reserve Board of Governors (April 2026)	Tariffs caused “the entirety of the excess inflation in core goods.” Full dollar-for-dollar pass-through to consumers. Without tariffs, prices would have fallen below pre-pandemic levels.
NY Fed / Columbia University (Feb 2026)	Americans bore ~90-94% of tariff costs in 2025
Congressional Budget Office	Foreign exporters bear only ~5% of costs; 95% falls on American firms and consumers
Fed Chair Jerome Powell (March 2026)	Confirmed tariffs account for 0.5-0.75 percentage points of the 3% core inflation rate
Duke/NBER wine study	On European wines, consumers paid 134% of the tariff amount — more than the tariff itself — because markups compound at each step

The wine study illustrates an important detail. A $1.19-per-bottle tariff resulted in consumers paying $1.59 more — 134% of the tariff amount. Each middleman in the supply chain marked up the higher cost, so the final price increase exceeded the tariff itself.

CNN fact-checked Trump’s WSJ op-ed and found it “littered with false claims.” The study Trump cited in the op-ed actually concluded the opposite of what he claimed.

Trump’s own Treasury Secretary, before joining the administration

Scott Bessent wrote in a January 2024 investor letter: “Tariffs are inflationary and would strengthen the dollar — hardly a good starting point for a US industrial renaissance.”

When Rep. Maxine Waters asked about the letter under oath on February 4, 2026, Bessent initially denied it. When Rep. Sean Casten subsequently confronted him with the actual text, Bessent shifted to saying he “was mistaken” about tariffs being inflationary.

What Do the Tariffs Actually Cost You?

Your groceries

Tariffs on agricultural inputs — fertilizer, machinery, packaging — have raised costs throughout the food supply chain. Fertilizer is up 10-15%, with tariffs adding approximately $100 per ton. Farm operating costs are projected 4% higher for corn and 6% higher for soybeans. The gap between what it costs farmers to grow food and the prices they receive hit a 10-year high.

Your home

For most families, housing is where the tariff impact adds up fastest.

Building material costs have surged: steel up 21%, copper up 25%, lumber tariffs totaling 45%
The National Association of Home Builders estimated $7,500-$10,000 in additional costs per new home
The Center for American Progress estimated $17,500 per home (using Urban-Brookings Tax Policy Center data) and projected 450,000 fewer homes built through 2030
60,000 fewer construction jobs as of February 2026 vs. December 2024

Your car

Auto industry tariff costs: $30 billion in 2025
Imported vehicles: $5,000-$8,900 more per vehicle
Domestic vehicles: $1,600-$2,000 more (because tariffs raise the cost of steel and parts that go into American-made cars too)
Average new vehicle list price (MSRP): up 10.4% (Kelley Blue Book); actual transaction prices rose 5.9% after incentives

Your appliances

Trump’s first-term washing machine tariffs are a case study in how tariffs actually work:

Washing machines cost $86-$92 more per unit (12% increase)
Total cost to consumers: $1.5 billion per year — for one product
Jobs created: 1,800
Cost per job created: $815,000 (American Enterprise Institute / University of Chicago)
Dryer prices also rose $92 — even though dryers weren’t tariffed — because manufacturers raised both prices together

Consumers paid $815,000 in higher prices for each manufacturing job that paid $40,000-$60,000 — a ratio of more than 10 to 1.

Your overall household budget

Yale Budget Lab: ~$1,400-$1,700 per household in additional costs in 2025
Tax Foundation: ~$1,500 per household average
The distribution is regressive: the bottom 10% of households pay 1.1-1.9% of their after-tax income in tariff costs, while the top 10% pay only 0.4-0.6% — roughly a 3x disparity

What Specific Tariffs Has Trump Imposed?

The average effective U.S. tariff rate went from 2.5% to approximately 27% between January and April 2025 — the highest in over a century. Key actions:

Date	Action	Rate
Feb 2025	Tariffs on Canada (citing fentanyl)	25% on goods, 10% on energy
Feb 2025	Tariffs on Mexico	25%
Feb 2025	Additional tariffs on China	20% on top of existing tariffs
Mar 2025	Steel and aluminum	25%
Apr 2, 2025	”Liberation Day” — 10% baseline on ALL countries, higher for specific ones	China 34%, EU 20%, Vietnam 46%, Japan 24%
Jun 2025	Steel and aluminum doubled	50%
Aug 2025	Automobiles	25-50%
Feb 2026	Supreme Court struck down main tariffs as unconstitutional (6-3)	Trump immediately imposed new tariffs under a different law
Apr 2026	Pharmaceuticals	100% (0% for companies that “negotiate” with the White House)

Other countries retaliated. Canada imposed 25% tariffs on $155 billion in U.S. goods. China tariffed U.S. coal, oil, and farm equipment. The EU targeted $84 billion in U.S. products. By September 2025, retaliatory tariffs affected $223 billion of U.S. exports — hitting American farmers especially hard.

The “Liberation Day” math was wrong

The conservative American Enterprise Institute found that the administration’s tariff formula contained a mathematical error that inflated rates by approximately 4x. They used the wrong economic variable. Corrected, Vietnam’s tariff would have been 12.2%, not 46%.

What Do Economists Say? (Including Conservatives)

Opposition to these tariffs crosses ideological lines. Conservative, libertarian, and liberal economists largely agree:

Conservative and libertarian critics:

American Enterprise Institute (conservative): Called the tariff formula having “no foundation in either economic theory or trade law.” Found the math error. Calculated the washing machine tariff cost $815,000 per job.
Cato Institute (libertarian): Called Trump’s tariff plan “economically ignorant, geopolitically dangerous, and politically misguided.”
Wall Street Journal editorial board (conservative): Called them “the dumbest trade war in history” and “the dumbest tariff plunge.” Repeatedly editorialized against them.
Reason magazine (libertarian): Reported the Federal Reserve study showing tariffs caused “the entirety of excess inflation.”

Trump’s own economic advisors were split:

Kevin Hassett, Trump’s NEC Director, responded to the Fed study not by disputing the data — but by demanding the Fed researchers be “disciplined” for publishing it.
Gary Cohn, Trump’s first-term NEC Director, actively opposed tariffs and eventually resigned over them.

Over 1,000 economists signed letters opposing the tariffs. Nobel laureates described them as “monstrously destructive."

"But Don’t Tariffs Bring Manufacturing Back?”

This is the strongest argument for tariffs, and the evidence on it is mixed.

Where tariffs have worked

Steel: U.S. steel production has genuinely increased. New plants are being built in West Virginia, Arkansas, and South Carolina. The U.S. became the third-largest steel-producing nation. If your only goal is to produce more domestic steel, the tariffs worked.

The catch

Steel is an input for almost everything else. Cars, buildings, appliances, bridges, infrastructure. Protecting 80,000 steel production jobs raises costs for the millions of workers in industries that use steel. Every study of broad tariffs (as opposed to narrow, product-specific ones) finds they destroy more jobs downstream than they create upstream.

The broader manufacturing data tells a different story:

Since “Liberation Day” (April 2025): 72,000 manufacturing jobs lost in the following 8 months
Trump’s first year in his second term: manufacturing lost 108,000 jobs (Joint Economic Committee)
Manufacturing as a share of GDP shrank from 11% to 9.4% between 2018 and mid-2025
The Cato Institute published research titled: “Trump’s First-Term Tariffs Crushed US Manufacturing”

Tariffs protected some specific industries while costing more jobs in the downstream industries that depend on those same materials.

The Historical Warning

The last time the U.S. tried tariffs this aggressively was the Smoot-Hawley Tariff Act of 1930. It triggered retaliatory tariffs from trading partners, global trade collapsed by 65%, and it deepened the Great Depression.

Trump’s April 2025 tariff framework raised the average effective rate to 22.7%, surpassing Smoot-Hawley’s effective rate. Retaliatory tariffs from Canada, China, and the EU are already affecting $223 billion in U.S. exports.

Who Actually Benefits?

Winners	How
U.S. steel producers	New plants, increased production
Federal revenue	$195 billion collected in FY 2025
Companies with all-domestic supply chains	Competitors’ imports are now more expensive

Losers	How
Every American consumer	Higher prices on nearly everything
Low-income families	Pay 3x more as a share of income
Homebuyers	$7,500-$17,500 more per new home
Car buyers	$1,600-$8,900 more per vehicle
Farmers	Higher input costs + lost export markets from retaliation
Manufacturing workers	72,000+ jobs lost since Liberation Day
Construction workers	60,000 fewer jobs

What the Evidence Shows

A tariff is a tax paid by American importers to U.S. Customs. The cost is passed to American consumers. This is confirmed by the Federal Reserve, the Congressional Budget Office, the New York Fed, Columbia University, the American Enterprise Institute, the Cato Institute, and the Wall Street Journal editorial board.

The administration says foreign countries pay. The Federal Reserve’s data shows otherwise.