Tariff pain on importers

Tariffs are landing first on U.S. importers, not foreign factories, and the latest rounds are raising costs across supply chains. (nber.org) A new National Bureau of Economic Research digest says pass-through rates reached 94% for the 2025 tariffs, meaning importers absorbed nearly all of the added duty as foreign exporters generally did not cut their prices. The same digest puts pass-through for the 2018-19 tariffs at 80%. (nber.org) Older research on the 2018-19 China trade war found the same pattern. A 2020 NBER paper said U.S. tariffs were “almost entirely borne” by U.S. firms and consumers, while another study found tariffs were “almost fully passed through” to prices paid by importers at the border. (nber.org 1) (nber.org 2) The current tariff stack is large enough to matter even after court changes. Tax Foundation said a 10% Section 122 tariff on nearly all countries took effect on February 24, 2026, covering an estimated $1.2 trillion of annual imports, or 34% of the total. (taxfoundation.org) Tax Foundation estimates the average effective U.S. tariff rate was 7.7% in 2025, the highest since 1947, and rises to 10.3% in 2026 while the Section 122 tariff remains in effect. It estimates the new 2026 tariffs will increase taxes by about $600 per U.S. household this year. (taxfoundation.org) Congressional Research Service said the administration used the International Emergency Economic Powers Act and Section 232 to raise tariffs after January 20, 2025, and it opened additional investigations under Section 301 that could produce more sector tariffs. The report also said several trading partners announced retaliatory tariffs on U.S. exports. (congress.gov) The price effects are already showing up in official data. A Federal Reserve note published May 9, 2025 found the February and March 2025 China tariffs had already lifted core goods Personal Consumption Expenditures prices by 0.3% and core PCE overall by 0.1%. (federalreserve.gov) That Fed note also found the 2018-19 tariffs passed through “fully and quickly” to consumer goods prices within two months. It said imported intermediate inputs can raise prices indirectly too, because tariffs hit parts used in domestic production as well as finished goods. (federalreserve.gov) Yale’s Budget Lab said tariff revenue through February 2026 was $214.7 billion above the 2022-24 average, while imported core goods and durable-goods prices each rose 1.5% during 2025 through January. The group also said tariff-exposed industries were showing some weakness relative to their pre-2025 trend. (budgetlab.yale.edu) The burden is especially acute for smaller companies because most importers are small. The U.S. Chamber of Commerce, citing a Commerce Department report, said 236,045 of 242,515 U.S. importers — 97% — have fewer than 500 employees. (uschamber.com) Research on the earlier trade war suggests supply chains do adjust, but slowly. The 2020 NBER paper found import responses grew over time, “consistent with the idea that it takes time for firms to reorganize supply chains,” which means companies often pay first and rewire later. (nber.org) That is the squeeze facing importers now: duties are collected at the border on arrival, while price increases, supplier shifts, and factory moves happen months later. The evidence from 2018-19, 2025, and early 2026 points in the same direction — most of the tariff bill stays in the United States. (nber.org) (federalreserve.gov)