The persistent debate over who ultimately pays for import taxes has found a new data point. While political messaging often suggests that foreign exporters absorb these costs, fresh research from the Federal Reserve Bank of New York indicates a different reality for American households. Between early 2024 and late 2025, the vast majority of the financial weight from these trade barriers remained within U.S. borders.
Large corporations managed the initial shock by stockpiling inventory or utilizing their massive bargaining power to squeeze suppliers. Small and medium-sized enterprises, however, lack the leverage to force foreign manufacturers to lower prices. For many of these local businesses, the only options are to accept thinner margins or raise prices for the end consumer.
The trade map is changing as companies look for alternatives to Chinese manufacturing. Imports from Vietnam and Mexico have surged, yet this redirection has not completely shielded the domestic economy from price hikes. Even as supply chains migrate, the inherent cost of new duties is largely passed through to the “importer of record”—the American entity bringing the goods across the border.
The Mechanics of Price Inflation
Economists from Columbia University and the Fed found that nearly 90 percent of the tariff burden fell on U.S. firms and consumers through November 2025. This mirrors the 2018-2019 trade war findings, where similar duties were almost entirely absorbed domestically. By the middle of 2025, the average tariff rate on U.S. imports had spiked from roughly 2.6% to 13%, creating a significant inflationary headwind.
Foreign suppliers have shown some willingness to “eat” a small portion of the costs to maintain market share, but this remains the exception rather than the rule. By the end of 2025, foreign producers were absorbing only about 14 percent of the costs. This suggests that while international firms value the American consumer market, they are not willing or able to subsidize U.S. trade policy indefinitely.
As companies deplete their pre-tariff stockpiles, the true test for the American economy lies ahead. The ability of businesses to continue negotiating contracts will determine whether these costs stabilize or trigger a broader wave of retail price increases in the coming year. If history is any guide, the domestic consumer will likely continue to carry the heaviest load.
Original analysis inspired by Ana Swanson and Sydney Ember from The New York Times. Additional research and verification conducted through multiple sources.
