American businesses and consumers, rather than foreign exporters, shouldered nearly the entire financial weight of the 2025 tariffs, according to a report released Thursday by the Federal Reserve Bank of New York.
Domestic Burden
Over the course of 2025, the average U.S. tariff rate surged from 2.6% to 13%, yet foreign prices failed to drop significantly to compensate for the hike.
Economists Mary Amiti, Chris Flanagan, Sebastian Heise, and David E. Weinstein found that for the majority of the year, the “economic burden” of the tariffs did not shift abroad.
The study highlights a stark reality for domestic firms: “94 percent of the tariff incidence was borne by the U.S. in the first eight months of 2025.”
This implies that foreign exporters largely maintained their prices, forcing American importers to pay the tax on top of the original cost of goods.
Supply Chain Shifts
As costs climbed, U.S. companies aggressively reorganized their supply chains to avoid the most heavily taxed regions.
China was the primary target of this shift; after facing duty spikes as high as 125 percentage points in early 2025, China’s share of U.S. imports fell below 10%—a historic low compared to its 25% share in 2017.
Meanwhile, Mexico and Vietnam emerged as the primary beneficiaries, gaining significant market share as importers fled high-tariff Chinese goods.
Exporters Hold Firm
The report notes that while pass-through rates cooled slightly by November—dropping to 86%—the overall trend remained lopsided. A 10% tariff typically resulted in only a 1.4% decline in foreign export prices by year’s end.
The researchers concluded that the promised relief from foreign price cuts never fully materialized: “U.S. firms and consumers continue to bear the bulk of the economic burden of the high tariffs imposed in 2025.”
Ultimately, the data suggests that for every dollar collected in tariff revenue, roughly 90 cents came directly from the pockets of American businesses and their customers.
Dow Rises Over 2% In 2026 But Nasdaq Falls
As of Thursday’s close, the Dow Jones index rose 2.21% year-to-date, whereas the S&P 500 was 0.37% lower. However, the Nasdaq Composite index was down 2.75% in 2026.
Meanwhile, the U.S. futures were trading lower on early Friday following a decline on Thursday.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, closed lower on Thursday. The SPY was down 1.54% at $681.27, while the QQQ declined 2.03% to $600.64.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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