US Tariffs Impact: 90% of Costs Borne by American Consumers, Says New York Fed Report

On February 12, the Federal Reserve Bank of New York released findings highlighting the significant US tariffs impact on domestic consumers and companies, concluding that nearly 90% of newly imposed import duties were ultimately paid within the United States rather than by foreign exporters. The analysis challenges assertions that overseas producers shoulder the bulk of tariff costs and instead points to widespread tariff pass-through into American prices.
The study examined developments in 2025, when average import taxes increased sharply from 2.6% to 13.0%. According to the New York Fed report, Americans absorbed 94% of tariff increases between January and August 2025. That share moderated to 92% in September and October before settling at 86% in November, reflecting modest adjustments in pricing dynamics but still indicating a dominant domestic burden.

US Tariffs Impact on Import Prices and Businesses

The researchers grounded their conclusions in historical evidence from the first Trump administration. During that earlier phase of trade tariffs, foreign exporters did not meaningfully reduce their prices to offset higher duties. As stated in the report, ?our past work found that foreign exporters did not lower their prices at all, so the full incidence of the tariffs was borne by the U.S. That is, there was 100% pass-through from tariffs into import prices.?

Tariff Pass-Through Trends in 2025

The 2025 data suggests a similar, though slightly moderated, pattern of tariff pass-through. Key findings include:

• 94% domestic absorption of tariff increases from January to August

• 92% pass-through in September and October

• 86% pass-through in November

These figures reinforce the broader US tariffs impact narrative that higher import taxes translate quickly into higher costs for American firms and households, either through direct price increases or compressed profit margins.

Congressional Budget Office and Inflation Implications

The New York Fed?s conclusions align with a February 11 assessment by the U.S. Congressional Budget Office. The CBO stated, ?higher tariffs directly increase the cost of imported goods, raising prices for U.S. consumers and businesses.? It further estimated that foreign exporters typically absorb only about 5% of the added cost.
In the near term, the CBO projected that U.S. businesses would absorb around 30% of higher import prices by reducing profit margins, while the remaining 70% would be passed through to consumers via higher retail prices. This distribution underscores the broader tariff cost burden and its ripple effects across supply chains.
Federal Reserve officials have indicated that a significant portion of the overshoot above their 2% inflation target in 2025 is linked to trade tariffs inflation pressures. Elevated import taxes have complicated monetary policy decisions, particularly regarding the timing and scale of potential interest rate cuts. Meanwhile, the U.S. Supreme Court is expected to rule on the legality of several of the tariffs, a decision that could reshape the trajectory of US tariffs impact on consumer prices and business costs in the months ahead.