Despite President Trump’s repeated claims that foreign countries are paying billions in tariffs to the United States, a rigorous study from the Federal Reserve Bank of New York found the opposite is true. Published on February 12, 2026, the study titled “Who Is Paying for the 2025 U.S. Tariffs?” concluded that nearly 90 percent of tariff costs fell on American firms and consumers — not on China, Canada, or any other exporting nation. To put that in concrete terms, when a 30 percent tariff is slapped on a Chinese-made product that costs $100 at the border, American importers and ultimately American shoppers are absorbing roughly $27 of that $30 charge, while the Chinese exporter eats only about $3 by marginally lowering their price.
This finding matters because the average U.S. tariff rate has surged from under 3 percent to approximately 13.7 percent as of February 2026 — a shift the Tax Foundation has called the largest U.S. tax increase as a percentage of GDP since 1993. The result is an estimated $1,500 additional cost per American household this year, which more than wipes out the roughly $1,000 benefit most families saw from Trump’s tax cut. This article breaks down exactly how tariff costs are distributed, what the NY Fed study found period by period, how the White House responded, what the Supreme Court ruled, and what all of it means for your wallet.
Table of Contents
- Who Actually Pays Trump’s Tariffs — Foreign Countries or American Consumers?
- How the Tariff Burden Breaks Down by Country and Sector
- The White House Attacks Its Own Federal Reserve
- What Tariffs Actually Cost Your Household
- The Supreme Court Ruling That Changed Everything
- How the Federal Reserve Study Was Conducted
- Where Tariff Policy Goes From Here
- Conclusion
- Frequently Asked Questions
Who Actually Pays Trump’s Tariffs — Foreign Countries or American Consumers?
The NY Fed study was authored by Mary Amiti, head of labor and product markets in the bank’s Research and Statistics Group, along with research analyst Chris Flanagan and research economist Sebastian Heise. Their methodology was straightforward: they examined U.S. Census Bureau and Foreign Trade Statistics data through November 2025 to determine whether exporting countries lowered their prices enough to absorb the tariffs or whether the costs were passed through to American buyers. What they found was that import prices for tariffed goods rose approximately 11 percent more than prices for goods that were not subject to tariffs — a near-complete pass-through. The numbers were damning across every period studied. From January through August 2025, americans bore 94 percent of tariff costs. From September through October, the figure was 92 percent. Even in November, when some foreign exporters began absorbing slightly more of the burden, American firms and consumers still paid 86 percent.
At no point did foreign exporters come close to shouldering even a quarter of the cost. The claim that tariffs function as a tax paid by foreign nations is, according to the Federal Reserve’s own data, almost entirely wrong. To understand why, consider how tariffs actually work mechanically. When a container of goods arrives at a U.S. port, the American importer — not the Chinese or Canadian manufacturer — writes the check to U.S. Customs and Border Protection. That importer then passes the added cost along through the supply chain until it lands on a price tag at your local store, or it absorbs the hit and watches its margins shrink. Foreign exporters can choose to lower their prices to stay competitive, but the NY Fed found they did so only to the tune of 6 to 14 percent of the tariff’s value.
How the Tariff Burden Breaks Down by Country and Sector
The current tariff landscape is uneven and, in some cases, staggeringly high. China faces a combined 30 percent tariff rate — 20 percent levied under the “fentanyl” justification and an additional 10 percent labeled as “reciprocal.” On February 27, 2026, the administration announced yet another 10 percent increase on Chinese goods, effective March 4. Canada is hit with 35 percent tariffs on certain sectors, 50 percent on imported metals, and 25 percent on non-U.S. manufactured automobiles. mexico, by contrast, has fared better — roughly 85 percent of Mexican exports are exempt from tariffs under the existing USMCA trade agreement. This patchwork creates real distortions. An American manufacturer that sources steel from Canada now pays 50 percent more for that input, a cost that gets baked into everything from cars to appliances to construction materials.
Meanwhile, a competitor sourcing from Mexico may face no tariff at all under USMCA protections. The uneven application does not just raise prices — it reshuffles supply chains in ways that create winners and losers among American businesses, often based on geography and existing trade relationships rather than any rational industrial policy. However, if you are a consumer buying products primarily sourced from Mexico or manufactured domestically with Mexican inputs, you may not feel the tariff pinch as acutely. The USMCA exemptions act as a significant buffer. But for anyone purchasing electronics, clothing, furniture, or other goods with heavy Chinese or Canadian supply chain exposure — which describes most American households — the price increases are real and measurable. The 11 percent price differential the NY Fed identified between tariffed and non-tariffed goods is not an abstraction. It shows up on receipts.
The White House Attacks Its Own Federal Reserve
The administration’s response to the NY Fed study was not to engage with its methodology or present counter-evidence. Instead, Kevin Hassett, Director of the National Economic Council, went on the offensive. On February 18, 2026, Hassett called the study “an embarrassment” and “the worst paper I’ve ever seen in the history of the Federal Reserve System.” He went further, suggesting that the study’s authors should be “disciplined” — a remarkable statement given that the Federal Reserve is supposed to operate independently of political pressure. The white house also characterized the study’s conclusions as “highly partisan,” a curious label for research conducted by career economists at a nonpartisan institution using publicly available government trade data.
Mary Amiti, the study’s lead author, has published extensively on trade economics and is widely cited in the field. The methodology — comparing price movements of tariffed versus non-tariffed goods — is a standard approach in trade economics that has been used by researchers across the political spectrum for decades. This response fits a pattern. When the Congressional Budget Office, the Bureau of Labor Statistics, or Federal Reserve researchers produce findings that conflict with administration talking points, the instinct has been to attack the institution rather than address the data. For consumers and voters trying to understand who is actually paying for tariffs, the question is simple: do you trust the Federal Reserve Bank of New York’s data analysis, or do you trust the assertion of officials with a political stake in the outcome? The numbers, at least, are not ambiguous.
What Tariffs Actually Cost Your Household
The Tax Foundation, a nonpartisan tax policy research organization, calculated that the current tariff regime amounts to an average $1,500 tax increase per U.S. household in 2026. That figure accounts for both the direct cost of higher-priced imported goods and the indirect cost of domestic producers raising prices because they face less import competition. Compare that to the estimated $1,000 benefit the typical household received from Trump’s tax cut, and the math is unflattering: the average family is roughly $500 worse off on net. That $1,500 figure is an average, which means the real impact varies. Lower-income households tend to spend a larger share of their income on goods — clothing, food, household items — and a smaller share on services. Since tariffs hit goods disproportionately, families earning $40,000 a year feel the bite far more acutely, as a percentage of their income, than families earning $200,000.
A family shopping at Walmart for school supplies, clothing, and small electronics is absorbing tariff costs on virtually every item in their cart. The tradeoff the administration has pitched is that tariffs will bring manufacturing jobs back to the United States, and that short-term pain will yield long-term economic benefits. That argument is worth examining honestly. Some reshoring has occurred, particularly in semiconductor manufacturing driven by the CHIPS Act. But the NY Fed data suggests that the “short-term pain” part of the equation is both larger and more persistent than the administration has acknowledged. If foreign countries were absorbing most of the tariff costs, as Trump claims, American consumers would be experiencing little pain at all. The data says otherwise.
The Supreme Court Ruling That Changed Everything
On February 20, 2026, the Supreme Court issued a 6-3 ruling that struck at the legal foundation of Trump’s tariff strategy. The Court found that the President cannot use the International Emergency Economic Powers Act to impose tariffs. IEEPA, originally designed to give the executive branch tools to respond to genuine national security emergencies, had been stretched by the administration into a vehicle for broad trade policy — a use the Court determined exceeded the statute’s intended scope and the President’s constitutional authority. This ruling does not retroactively undo tariffs already collected, but it severely limits the executive branch’s ability to impose new tariffs unilaterally without congressional approval. The practical implications are still unfolding. Some existing tariffs were imposed under other statutory authorities — Section 301, Section 232 — and are not directly affected by the IEEPA ruling.
But the decision signals that the judiciary is unwilling to grant the executive branch a blank check on trade policy, and future tariff actions will face a higher legal bar. The limitation here is important to understand: this ruling does not mean all tariffs are going away. Congress retains the power to impose tariffs through legislation, and tariffs imposed under other legal authorities remain in effect unless separately challenged. What the ruling does is close one particular backdoor that the administration had been using aggressively. For consumers hoping for immediate price relief, the timeline is uncertain. Tariffs already in place continue to function as a tax on imports — and on your wallet — until they are formally rescinded or expire.
How the Federal Reserve Study Was Conducted
The NY Fed researchers used a method that trade economists have relied on for years: they tracked the prices of goods entering the United States and compared the trajectory of products subject to new tariffs against products that were not. If foreign exporters were truly “paying” the tariffs, you would expect to see them cutting their pre-tariff prices by an amount roughly equal to the tariff — keeping the final cost to American buyers roughly flat. Instead, import prices on tariffed goods rose by approximately 11 percent more than prices on comparable non-tariffed goods. That gap represents the cost being passed directly to American importers and, ultimately, consumers.
The study drew on U.S. Census Bureau trade data and Foreign Trade Statistics through November 2025, covering millions of individual import transactions. This is not a survey of opinions or a theoretical model — it is an empirical measurement of what actually happened to prices at the border. The finding that Americans paid between 86 and 94 percent of tariff costs depending on the time period is consistent with virtually every prior academic study of tariff incidence, including research conducted during the first Trump administration’s trade war with China.
Where Tariff Policy Goes From Here
The combination of the NY Fed’s findings, the Supreme Court’s IEEPA ruling, and the Tax Foundation’s household cost estimates creates a political and economic environment where tariff policy is likely to face increasing scrutiny. Congress may be forced to play a more active role in trade policy now that the executive branch has lost one of its primary tools for acting unilaterally. Whether that leads to more deliberate, evidence-based tariff policy or simply more partisan gridlock remains to be seen. For American consumers and businesses, the immediate reality has not changed.
Tariffs currently in effect — the 30 percent on Chinese goods, the 35 percent on certain Canadian sectors, the 50 percent on imported metals — continue to function as a hidden tax. The NY Fed’s research makes clear that calling it anything else is, at best, a misunderstanding of how tariffs work, and at worst, a deliberate misrepresentation. The data does not care about political messaging. Americans are paying, and they are paying roughly 90 cents of every tariff dollar.
Conclusion
The Federal Reserve Bank of New York’s study is as clear as economic research gets: American firms and consumers paid nearly 90 percent of tariff costs in 2025, not foreign countries. The administration’s response — attacking the researchers rather than the research — does nothing to change the underlying reality that the average U.S. household faces an estimated $1,500 annual cost increase from tariffs, more than offsetting the benefits of the Trump tax cut. The Supreme Court’s 6-3 ruling against using IEEPA for tariffs adds a legal dimension to what was already an economic problem.
Going forward, consumers should understand that tariffs are, functionally, a sales tax on imported goods — one that American buyers pay at the register. Whether you support tariffs as a tool for reshoring manufacturing or oppose them as a regressive tax on working families, the starting point for any honest debate has to be an accurate accounting of who bears the cost. The NY Fed answered that question with data. The answer is us.
Frequently Asked Questions
Do foreign countries pay any portion of U.S. tariffs?
A small portion, yes. The NY Fed found that foreign exporters absorbed between 6 and 14 percent of tariff costs by lowering their prices, depending on the time period. But American firms and consumers bore the vast majority — between 86 and 94 percent.
How much are tariffs costing the average American household?
The Tax Foundation estimates the current tariff regime amounts to approximately $1,500 per household in 2026. That figure exceeds the estimated $1,000 benefit most households received from the Trump tax cut.
What did the Supreme Court rule about tariffs?
On February 20, 2026, the Supreme Court ruled 6-3 that the President cannot use the International Emergency Economic Powers Act to impose tariffs. This limits the executive branch’s ability to impose tariffs unilaterally but does not affect tariffs imposed under other legal authorities like Section 301 or Section 232.
What are the current tariff rates on Chinese goods?
China currently faces a combined 30 percent tariff rate — 20 percent under a fentanyl-related justification and 10 percent labeled as reciprocal tariffs. An additional 10 percent increase was announced on February 27, 2026, effective March 4.
Did the White House dispute the NY Fed study?
Yes. Kevin Hassett, Director of the National Economic Council, called the study “an embarrassment” and “the worst paper I’ve ever seen in the history of the Federal Reserve System” on February 18, 2026. He suggested the authors should be disciplined. The White House characterized the findings as “highly partisan.”
Are Mexican imports subject to tariffs?
Most Mexican exports — approximately 85 percent — are exempt from tariffs due to protections under the USMCA trade agreement. This is a significant contrast to the treatment of Chinese and Canadian goods.