U.S. tariffs as policy

A year ago, the White House sold its tariff burst as a shock. Hit imports hard, force companies to move, collect money at the border, then move on. That is not what happened. The courts knocked out the administration’s broadest tariffs in February 2026, but the policy did not disappear. It was rebuilt through older trade laws, including a temporary 10 percent tariff under Section 122 and a widening set of sector tariffs under Section 232 and other authorities. The important change is not legal. It is strategic. Tariffs are no longer being treated as an emergency measure. They are being rebuilt as normal policy (taxpolicycenter.org; grantthornton.com; politico.com). That shift matters because businesses plan around permanence, not slogans. KPMG’s latest tariff survey found companies moving from contingency planning to actual supply-chain changes, with margins squeezed and more firms passing costs through to customers. The share of businesses passing along more than half of tariff costs more than doubled over the past year. This is what a standing policy does. It stops being a headline risk and starts becoming a budgeting assumption (kpmg.com). Once tariffs become an assumption, the economy changes in quieter ways. Yale’s Budget Lab estimates that the average effective U.S. tariff rate stood at 11.0 percent on April 2, 2026, the highest since 1943 excluding the brief 2025 spike. Even if the current Section 122 tariff expires on schedule, the rate would still sit at 8.2 percent, the highest since 1946. The same analysis estimates that existing tariffs would leave the long-run U.S. economy modestly smaller, while lifting manufacturing output somewhat and hitting other sectors harder, especially construction. That is the real shape of the policy. It does not rebuild the whole economy. It redistributes pain and protection across it (budgetlab.yale.edu). The money coming in at the border is real. So are the costs. Yale estimates that the 2025 tariff wave had raised $214.7 billion in inflation-adjusted customs revenue above the 2022–2024 average by February 2026. The same tracker finds clear pass-through into consumer prices for imported goods. Imported core goods and durable goods prices both rose 1.5 percent during 2025 through January, with tariff pass-through estimates that are large enough to show up in household budgets. The administration can point to revenue. It cannot honestly claim foreigners paid it (budgetlab.yale.edu). Trade flows changed too, but not in the simple way tariff politics promised. The best recent evidence shows rerouting, not retreat. A CEPR VoxEU analysis using U.S. import data through 2025 finds that direct imports from China kept falling, but total U.S. merchandise imports still rose. The trade did not vanish. It moved. More of it shifted toward countries facing lower tariff rates and toward established alternative partners rather than a broad, clean diversification. That means the system is becoming more political without becoming less global (cepr.org). Markets noticed that political turn early. Research highlighted by CEPR found that when tariffs are met by retaliation, the dollar tends to weaken, and the post–April 2, 2025 jump in long-term Treasury yields was unusually sharp. Investors were not reacting to a one-off customs change. They were reacting to a new regime in which trade policy, inflation risk, fiscal strain, and geopolitical alignment all started to blur together (cepr.org). That is why the administration’s latest move was not to unwind the tariff state after the Supreme Court loss. On the first anniversary of “Liberation Day,” it expanded it again, this time with tariffs of up to 100 percent on some branded pharmaceuticals and revised duties on metals, while carving out exemptions for favored firms and countries (politico.com).