By Matt Underwood A recent report from the Federal Reserve Bank of New York has shed light on a truth many suspected all along: Americans are shouldering the vast majority of the costs associated with former President Trump’s tariffs. It turns out that approximately 90% of these tariffs are ultimately paid for by consumers here in the United States. This is a revelation that, while perhaps shocking to some, aligns precisely with how economists have long understood the mechanics of tariffs. When a country imposes taxes on imported goods, those costs don’t simply vanish into thin air. Instead, they are typically passed on down the line, from the importer to the retailer, and ultimately to the end consumer.
Considering that the United States collected an estimated $287 billion in tariffs last year, and with a population of around 340 million, this means each American effectively paid about $759 in extra costs. It’s a significant sum, especially when considering how these tariffs were often framed as being paid by other nations. The idea that foreign entities would absorb the financial burden was a key selling point, but this report indicates that the reality was far different. It begs the question of who, or what, absorbs the remaining 10%. While some exporters might take a slight hit to their profit margins to maintain market share, this is generally not a sustainable long-term strategy, and the bulk of the cost is inevitably absorbed by the domestic economy.
This entire situation raises eyebrows about the very nature of taxation. There’s a strong argument to be made that tariffs, when levied by the executive branch without explicit congressional approval, could be construed as a form of taxation without representation. Historically, such actions have led to significant societal upheaval, as citizens rightly expect their elected representatives to have the authority over how taxes are imposed. The report’s findings underscore how this tariff policy functioned precisely as many experts predicted, and that the economic consequences were, in a sense, foreseeable.
What’s particularly frustrating is that this information has been available and understood by those who follow economic principles closely. The notion that this is some kind of sudden, shocking discovery feels disingenuous, especially when contrasted with campaign rhetoric that suggested otherwise. It’s as if there’s a collective amnesia about how tariffs work, or perhaps a deliberate attempt to obscure the truth. This report, in many ways, confirms what most people with a basic grasp of economics already knew.
The idea that Americans would be the ones paying for these tariffs isn’t a surprise to many; it’s the expected outcome. The disconnect arises when that reality clashes with political messaging. The report essentially validates the common-sense understanding that import taxes eventually find their way to the consumer. When companies import goods, and then face tariffs, they must adjust their pricing to remain profitable. This adjustment almost invariably involves increasing the prices of those goods.
Looking at a hypothetical scenario, imagine a company like Walmart importing toothbrushes. If the cost of goods sold (COGS) increases due to tariffs, they can’t afford to maintain their previous profit margins without raising prices. To account for the added tariff cost and still meet shareholder expectations for earnings, they’re incentivized to increase the retail price. This means that the $759 per person figure might even be an underestimate, as companies may also use tariffs as an opportunity to boost profits further by increasing prices beyond just covering the tariff itself, especially if competition is doing the same.
The funds collected from these tariffs are also a point of contention. If the intention was to bolster the national treasury, the impact on the deficit appears minimal in the grand scheme of things. Given the sheer size of the national debt, the collected tariffs represent a relatively small drop in a very large ocean. The question then becomes where this money actually went. Reports suggest a significant portion was allocated to border operations, immigration enforcement, and military expenditures, essentially fueling initiatives that align with a particular administration’s priorities.
It’s also worth noting that once prices are raised due to tariffs, they rarely come back down, even if the tariffs are later removed. Businesses, having established new price points and enjoyed increased profits, are unlikely to voluntarily lower them. They can use the removal of tariffs as an opportunity to further pad their bottom line, meaning the economic burden on consumers can persist long after the policy itself has changed. This makes tariffs a particularly insidious form of economic policy, impacting the affordability of everyday goods for a broad segment of the population, particularly those with lower incomes who spend a larger proportion of their earnings on essential items.
The report from the NY Fed serves as a stark reminder that economic realities often differ from political narratives. The implication that Americans are paying for nearly all of Trump’s tariffs, to the tune of hundreds of dollars per person, is a significant finding. It underscores the importance of understanding the fundamental principles of economics and questioning claims that seem too good to be true, especially when they involve the imposition of new taxes. The world, as the saying goes, often wants to be deceived, and this report highlights an instance where that desire may have come at a considerable cost to the average American.