When President Donald Trump unveiled his sweeping “Liberation Day” tariffs last April, pundits on both sides of the aisle responded by describing the likely effects in superlatives. In a White House Rose Garden speech, Trump declared the duties would boost domestic production, create jobs, and generate “trillions and trillions of dollars to reduce our taxes and pay down our national debt.” Critics warned of elevated prices and inflation, with some even forecasting product shortages, for US residents. The more extreme predictions on both sides appear to have been off the mark.

Research by Harvard’s Gita Gopinath and Chicago Booth’s Brent Neiman provides early indications of the effects the tariffs announced in April and afterward are having on the US economy, and there is both good and bad news for US businesses. “The actual implemented tariff rates have not been as high as the announcements have suggested,” says Neiman. However, US residents—and not foreign governments or offshore suppliers—are picking up the vast majority of the related economic cost. “In terms of who’s paying for more of it, it’s disproportionately, almost entirely so far, on the US side,” he says.

President Trump has been advocating higher tariffs for decades. In 2018 and 2019, during his first term, he roughly doubled the trade-weighted average statutory tariff rate from 2 percent to 4 percent, the highest level since the North American Free Trade Agreement went into force in 1994. Those duties were focused on a few industries and China. Ultimately, 80 percent of those tariffs were passed through to US importers, the recent study demonstrates.

The tariff regime the president unveiled last spring was far larger in size and scope. It increased statutory rates by 10 percentage points or more on imports from 88 countries and on 77 products.

At the end of September, the administration’s average statutory tariff stood at 27 percent, the highest level for the US in over a century. However, the researchers find that the Treasury has collected import duties at only about half that rate due to enforcement gaps, exemptions on everything from semiconductors to pharmaceuticals, and a free pass for goods already in transit. That may help explain why until now the tariffs have not proven as inflationary as some had warned.

But contrary to the president’s assurances, foreigners are not bearing the cost. The researchers studied trade data from the US census and find, instead, that 94 percent of the tariffs were passed along to US buyers in 2025. “So far, exporters appear to have reduced prices by about 6 percent of the size of the tariff,” Neiman explains. “So if a 10 percent tariff is imposed on a good, a US importer will pay 9.4 percent more for it, inclusive of the tariff.”

In a separate exercise, the researchers used import price data from the US Bureau of Labor Statistics to calculate pass-through rates for seven exporters or exporter groups and 44 sectors. The exercise indicated once again that tariffs were passed through to import prices at high rates. The 10 sectors facing the largest tariff increases saw pass-through rates of 90–114 percent, the study indicates.

Gopinath and Neiman acknowledge that a 12-month study of pooled goods and countries with varying tariff rates—required to work with the BLS data—provides only a crude pass-through measure. (The analysis of census data is their preferred methodology.) However, they say that both analyses strongly suggest pass-through rates are not low. Foreign exporters did not cut prices to meaningfully offset the tariffs in 2018–19 or in 2025.

“The general point seems to be that in both episodes, pass-through to US import prices is pretty darn high,” says Neiman.

Naturally, US importers sought to shift their spending away from goods with the highest tariffs. This trend was most notable with China. Its exporters faced the highest US tariffs and saw the largest drop in import market share among big American trading partners. China’s share of US imports plunged from 12.5 percent at the end of 2024 to 7–10 percent in recent months.

In addition to retail customers, US manufacturers are facing tariff-induced price increases, since most US imports are intermediate inputs and capital goods that domestic companies use to produce finished products. This has implications for their competitiveness and may suggest that US producer price inflation, which was 3 percent higher this past November than it had been one year earlier, could remain elevated.