President Donald Trump announced his "Liberation Day" tariffs on April 2, 2025, implementing a universal baseline tariff of 10% on all imports along with higher duties targeting Canada, Mexico, China, and several other countries. As the policy approaches its one-year anniversary, economic analysts and policymakers continue to debate who bears the financial burden of these trade measures.
The tariff structure included 10% to 41% reciprocal tariffs, a 33.4% tariff on China, and duties on steel and aluminum exceeding 39%. However, the United States-Mexico-Canada Agreement partners secured exemptions that kept their effective tariff rates below 5%.
What the Left Is Saying
Progressive and moderate-left analysts have pointed to data suggesting American households and businesses are bearing the majority of tariff costs. The University of Pennsylvania's Penn Wharton Budget Model found that overall effective tariff rates increased from 2.2% in January 2025 to 9.75% by July, peaking around 13% by year-end.
An analysis from Liberty Street Economics, an offshoot of the Federal Reserve Bank of New York, found that nearly 90% of the tariffs' economic burden fell on U.S. firms and consumers. The Council on Foreign Relations echoed these findings, noting that tariff costs are typically passed through to domestic buyers rather than foreign exporters.
The Fortune news outlet, rated as center on the political spectrum, covered the Liberty Street Economics findings by noting that despite Trump insisting foreign businesses are paying for his tariffs, mounting data indicates American households and businesses are footing the bill. Germany's Kiel Institute for the World Economy has also published research supporting the view that tariff costs are largely absorbed by U.S. importers and consumers.
What the Right Is Saying
Conservative commentators have challenged the narrative that Americans are paying for tariffs. Breitbart, rated as right-leaning, called the findings that Americans pay over 90% of tariffs 'a myth.'
Citing the same Kiel Institute study used by some analysts, Breitbart argued that claims to have settled the tariff debate with unambiguous evidence are problematic. The outlet noted that the study doesn't actually prove what it claims and provides zero empirical analysis of retail prices, corporate profit margins, or pass-through along the supply chain.
Trump administration officials have maintained that foreign exporters are absorbing much of the cost through reduced profit margins, arguing that tariffs serve as a negotiating tool to open foreign markets and encourage domestic manufacturing. Supporters contend the long-term benefits include reshoring jobs and reducing trade deficits, even if short-term costs fall on importers.
What the Numbers Show
The Penn Wharton Budget Model data shows effective tariff rates rose from 2.2% in January 2025 to approximately 13% by December 2025, a nearly six-fold increase. Specific tariff rates included reciprocal tariffs ranging from 10% to 41%, a 33.4% duty on Chinese goods, and steel and aluminum tariffs exceeding 39%.
The Liberty Street Economics analysis suggests approximately 90% of tariff costs fall on U.S. firms and consumers, with minimal evidence that foreign manufacturers are absorbing significant costs through reduced pricing. However, a separate 2025 paper from the National Bureau of Economic Research estimates that about 20% of Trump's tariffs ultimately reached U.S. consumers through higher prices, with the remainder absorbed by other parts of the supply chain.
USMCA partners Mexico and Canada secured exemptions that kept their effective tariff rates below 5%, in part through claimed compliance with trade agreement provisions. Trade data from the first year of the tariff regime will provide additional clarity as more complete figures become available.
The Bottom Line
One year into Trump's tariff strategy, the economic evidence suggests most tariff costs are being absorbed by U.S. businesses and consumers rather than foreign exporters, though estimates vary significantly depending on methodology. The National Bureau of Economic Research puts consumer-facing costs at roughly 20%, while the Federal Reserve Bank of New York's analysis suggests a much higher burden on domestic firms and households.
The debate over who pays for tariffs is likely to continue as more data becomes available. Businesses face higher input costs, consumers see some price increases on affected goods, and the ultimate impact on employment and manufacturing remains to be fully assessed. Analysts will watch upcoming trade data, inflation reports, and corporate earnings statements for further evidence of the tariff regime's effects on the broader economy.
The administration has indicated it will continue using tariffs as a negotiating tool, while critics argue the policy amounts to a hidden tax on American consumers. Both sides agree that tariff revenue has increased substantially, with the question of distribution remaining a point of political and economic contention.