A New York Fed analysis has confirmed what independent economists warned about for years: American businesses and consumers, rather than foreign exporters, shoulder the vast majority of the costs created by tariffs on steel, aluminum, and Chinese goods. The finding directly contradicts repeated political assurances that trading partners would bear the financial burden. With the Tax Foundation estimating that 2025 tariff increases alone cost the average U.S. household $1,000, the economic evidence now points in a single, uncomfortable direction for domestic wallets.
Importers Absorbed Nearly All Tariff Costs
The clearest evidence of who actually pays comes from the federal government’s own research arm. The U.S. International Trade Commission examined the effects of Section 232 tariffs on steel and aluminum and Section 301 tariffs on Chinese goods between 2018 and 2021. Its conclusion was blunt. U.S. importers bore nearly the full cost because import prices increased roughly one-for-one with the tariff increases. In practical terms, when the government added a 25% duty on a shipment of steel, the price paid by the American buyer rose by almost exactly 25%. Foreign suppliers did not significantly cut their prices to absorb the hit, leaving domestic firms to either accept lower margins or raise prices for their customers.
That one-for-one pass-through finding has been confirmed by multiple independent studies. Economists Mary Amiti, Stephen Redding, and David Weinstein reached the same conclusion in their analysis of the 2018 trade war, documenting near-complete pass-through of tariffs into U.S. import prices and estimating a real-income loss of $1.4 billion per month by the end of 2018. The consistency across government and academic research makes the pattern difficult to dismiss as a modeling quirk. Tariff duties are collected from importers of record, as U.S. Customs and Border Protection data confirm, and those importers have consistently passed the added expense downstream to businesses and shoppers in the form of higher prices or reduced product variety.
Price Spillovers Hit Products That Were Never Tariffed
One of the least discussed consequences is how tariffs raise prices on goods that were never targeted. Researchers Aaron Flaaen, Ali Hortacsu, and Felix Tintelnot studied the 2018 washing machine tariffs and found that washer prices climbed approximately 12% after the duties took effect. That alone would be a straightforward cost increase. But the researchers also documented that dryer prices rose by a similar amount, even though dryers were not subject to any tariff. Because washers and dryers are typically sold together, manufacturers and retailers raised prices across the product pair rather than isolate the increase to a single appliance.
This spillover effect matters because it means the true consumer cost of tariffs extends well beyond the specific product categories listed in any trade order. When steel and aluminum become more expensive due to Section 232 duties, the price pressure ripples into automobiles, appliances, construction materials, and beverage cans. The USITC found that these tariffs caused declines in downstream production, meaning that industries relying on tariffed inputs faced both higher costs and reduced output. The washing machine case is a concrete, measurable example of a dynamic that plays out across dozens of sectors simultaneously, with knock-on effects for employment, investment, and regional manufacturing hubs that depend on competitively priced inputs.
The National Security Rationale and Its Blind Spots
The original justification for the steel and aluminum tariffs rested on national security grounds. The Department of Commerce’s Section 232 investigation argued that dependence on foreign aluminum threatened domestic defense capacity. That rationale gave the executive branch broad authority to impose duties without the standard congressional trade process. Yet the investigation’s framework largely set aside the question of what would happen to downstream industries that consume aluminum and steel in far greater volumes than primary producers supply (from automakers to aerospace contractors and construction firms).
The result has been a tension between the stated goal of protecting a narrow set of primary metal producers and the broader economic damage to manufacturers that use those metals as inputs. Auto parts makers, construction firms, and food and beverage packagers all faced higher material costs and, in many cases, greater uncertainty over supply. While domestic steel and aluminum production did see some gains, the USITC documented that downstream production declined in many affected sectors. The tradeoff, in other words, was never simply “American jobs saved” compared with “foreign profits lost.” It was a transfer of costs from one group of American industries to another, with consumers ultimately absorbing the difference at the register and workers in metal-using sectors exposed to slower growth or reduced hours.
New York Fed Data Puts a Number on the Domestic Burden
The most recent quantification of who pays came from the Federal Reserve Bank of New York, which used customs data to estimate that U.S. businesses and consumers pay 90% of tariff costs. That figure leaves very little room for the argument that foreign exporters are footing the bill. When 90 cents of every tariff dollar stays inside the domestic economy, the policy functions less like a penalty on trading partners and more like a consumption tax on American buyers. For firms that rely on imported components, the tariffs act as a cost shock that can erode competitiveness both at home and in export markets.
The Tax Foundation, a nonpartisan fiscal policy research organization, put the household impact in concrete terms. It defined tariffs as a new tax on consumers and calculated that 2025 tariff increases cost the average household $1,000. That burden falls disproportionately on lower- and middle-income families, who spend a larger share of their income on goods rather than services and have less room in their budgets to absorb higher prices. For these households, tariff-driven increases on everyday items (from appliances and electronics to cars and canned food) can crowd out savings or other essential spending, amplifying the policy’s regressive impact.
Why the Evidence Gap Still Shapes the Political Debate
Despite this mounting empirical record, public discussion of tariffs often lags behind the data. Political messaging tends to frame tariffs as a way to force foreign governments and companies to “pay their fair share,” while the technical reality is that duties are assessed at the border on U.S. importers. The disconnect is partly due to the complexity of tracing how those costs move through supply chains, and partly because the pain is dispersed: a slightly higher price on a washing machine here, a costlier pickup truck there, rather than a single, easily visible tax bill. Without clear, accessible explanations, it is easy for voters to accept the idea that someone abroad is footing the bill.
Bridging that gap requires more than academic papers. Central banks and market analysts increasingly track trade policy as a macroeconomic risk, and tools such as monetary policy dashboards and real-time indicators help show how tariffs interact with inflation, interest rates, and growth. At the micro level, business schools and executive programs, regularly benchmarked in resources like global education rankings, are incorporating tariff pass-through and supply-chain resilience into their curricula, shaping how future managers respond to trade shocks. For investors, tariff announcements are now part of the same information set as earnings releases and economic data, feeding into pricing models tracked on platforms such as financial market data. Together, these channels can narrow the evidence gap by translating technical findings into the language of household budgets, corporate strategy, and portfolio risk, making it harder to sustain the fiction that tariffs are paid somewhere else.
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*This article was researched with the help of AI, with human editors creating the final content.
Grant Mercer covers market dynamics, business trends, and the economic forces driving growth across industries. His analysis connects macro movements with real-world implications for investors, entrepreneurs, and professionals. Through his work at The Daily Overview, Grant helps readers understand how markets function and where opportunities may emerge.
