Tariffs Lifted Goods Prices 2.9 Points While Reshoring Lags

Who pays for the tariffs

The argument over who pays for President Trump's tariffs has been settled by the economists who study it. It has not been settled in politics. Over the past few weeks, a run of Federal Reserve research, a congressional budget estimate and fresh polling has pointed the same way: most of the cost of the import duties lands on American households, not on foreign exporters. The White House still says the opposite.

The claim has mattered more since the legal ground moved. In February, the Supreme Court struck down the emergency-powers tariffs, and many business groups hoped the trade war would end there.2 It didn't. In July the administration announced a new set of duties that cover nearly all U.S. imports and rest on long-standing trade statutes instead of emergency powers.2 Trade economist Kent Jones notes that most of the earlier levies turned out to be temporary, while the new ones are built to last.1 The question is therefore no longer whether consumers will feel the cost. It is how long they will feel it, and whether the promised payoff in reshored factories shows up.

What the Fed research found

The most detailed account so far comes from the Federal Reserve Bank of New York. Economists Mary Amiti, Sebastian Heise and David Weinstein estimate that each one-point rise in average tariffs pushes consumer goods prices up by about a quarter of a percent after a year.21 Foreign exporters cut their prices very little, so about 90% of the 2025 tariffs showed up in U.S. import prices, nearly one for one in the first month.21

The study also finds that tariffs raise the prices of goods that are never taxed at the border. About a third of the total effect comes from U.S.-made goods. Domestic producers pay more for imported inputs, and some raise their prices because pricier imports give them less competition.21 That indirect effect builds slowly, over nine to twelve months, so the full consumer impact takes about a year to appear.28 On the authors' estimates, tariffs had added 2.9 percentage points to goods inflation by February 2026. Without them, goods prices would have fallen slightly.21

Other research points the same way, though the estimates differ in size. Dallas Fed researchers estimated that core inflation in March would have been 2.3% rather than the actual 3.2% without tariffs. They described the transfer of costs to consumers as "full pass-through."29 A separate Fed study cited in the same coverage found that retailers add a $1 tariff-driven cost increase to the shelf price about seven months later.29 The Yale Budget Lab put the implied pass-through to imported consumer goods prices at roughly 46% to 86% for core goods and 51% to 115% for durables, depending on the method.22

Where the estimates disagree

A reader could see a contradiction between the New York Fed's "about a quarter" and Dallas's "full pass-through." For the most part, there isn't one. The New York Fed figure measures the effect on the final retail price. Distribution costs such as transport, wholesaling and retailing make up about half of what shoppers pay, and tariffs don't raise those costs directly.21 Its estimates also compare goods with more and less tariff exposure while holding the wider economy fixed.23 The Peterson Institute's review of the research sums it up: studies differ on how fast and how completely importers pass costs to shoppers, but several agree that U.S. buyers bore about 90% of the burden in 2025.27

The Congressional Budget Office is the closest thing to an official referee. In February it estimated that foreign exporters absorb just 5% of tariff costs. In May it told Congress the foreign share may have risen to 10% to 15% by the end of 2025.10 Even the most generous reading leaves at least 85% of the bill at home. The Tax Foundation puts the current tariffs at about $820 per household in 2026, down from about $1,000 in 2025.10

The research does show some relief, and fairness requires saying so. The St. Louis Fed found that the tariff push on inflation leveled off in the first half of 2026. Lower effective rates and trade shifting toward lower-tariff products and countries both played a part.24 The New York Fed expects the tariff effect on the goods price level to ease to about 2% by August, after the court ruling replaced the emergency tariffs with a lower 10% surcharge.21

That easing does not mean prices fall. The New York Fed's conclusion is that tariffs have permanently raised the price level, even as their contribution to the inflation rate fades.21 The effect also starts climbing again after August, largely because the August 2026 tariffs on Canadian goods are still feeding through.21 A scheduled January 2027 increase on Canadian cars, trucks and auto parts is expected to add more by mid-2027.21

Layered tariffs, layered costs

The new tariffs are harder to unwind than the old ones. The July measures rely on three statutes: Section 301 on unfair trade practices, Section 232 on national security, and Section 338, a 1930 trade-war tool.1 Global Section 301 rates currently run from 10% to 12.5% and can rise at the president's discretion. Brazil faces 25%, and some Canadian goods carry an extra 50% under Section 338.1 Product-specific duties of 25% to 50% apply to steel, aluminum, autos, copper, lumber and pharmaceuticals.1

Jones argues that because these duties are added on top of each other and on top of legacy rates, consumers will be squeezed further even if no headline rate changes.1 Twenty-five states have challenged the Section 301 tariffs at the Court of International Trade, arguing that they work as an unconstitutional tax on consumers, much like the emergency levies the Supreme Court struck down.2 In my reading, that case faces long odds. Courts have generally given presidents wide latitude under Section 301, and Jones suggests the administration is counting on that.2

The reshoring payoff so far

The administration's defense of the tariffs rests less on prices than on factories. The White House has called the current period "the largest reshoring wave in American history." It points to pledges such as Apple's $600 billion and Johnson & Johnson's $55 billion.15 A new Council of Economic Advisers report credits reshoring and tariff policy with 72,000 manufacturing jobs added in 2026.13

Independent data give a more mixed picture. Private manufacturing construction spending peaked at $249.1 billion in March 2025 and then fell for eleven straight months to $209.8 billion. Even so, that is still 2.6 times the January 2020 level.20 Manufacturing payrolls stood at 12.61 million in July 2026. That is 14,000 fewer than a year earlier but 31,000 more than in December 2025. Both camps can cite a number that suits them.20 IoT Analytics concluded flatly that a tariff-driven reshoring boom has not shown up in the macro data.12

The trade data are the most telling. Kearney's Reshoring Index, which compares imports from low-cost Asian countries with domestic factory output, improved in 2026 but stayed negative, and those imports rose 4.6% to a four-year high.14 China's share fell below 10%, but other Asian exporters picked up $193 billion and imports from Mexico rose 8%.14 U.S. manufacturing capacity grew only 1.5% over four years in which investment tripled, as uncertainty delayed or cancelled projects.14 The monthly trade deficit widened to $105.6 billion in August from $92.8 billion in July.4

For now, the main effect of the tariffs has been to reroute supply chains rather than bring them home. Manufacturers themselves say tariffs are not the strongest lever. In the 2025 USA Reshoring Survey, original equipment manufacturers said a stronger skilled workforce would bring back 30% of their offshore products. A 15% tariff would bring back 23%.11

Voters have noticed

The cost argument is now a midterm issue. A Center Square poll taken Oct. 5–7 found that 58% of registered voters say U.S. consumers pay most of the cost of tariffs. Only 15% named foreign countries.5 Among Republicans, 47% said consumers pay, more than double the share who blamed foreigners.4 A CFR–Morning Consult survey found that 75% of Americans worry about affording groceries, and 83% of those say tariffs push those prices up.3

The polling also shows how far opinion still diverges. In the CFR survey, Americans split almost evenly on whether a tariff is a tax paid at home (41%) or a fee paid by foreigners (40%), largely along party lines.3 Rising energy costs also cloud the picture. Gas prices are up roughly 40% from a year ago because of the conflict with Iran, which makes it harder for households to separate tariff costs from fuel costs.8

The outlook

Taken together, the research supports a firm conclusion. Tariffs are a domestic tax that mostly falls on American households, and it shows up both in imported goods and in the U.S.-made goods that compete with them. The worst of the inflation spike appears to be over, but the higher price level is not going away. The administration has made the duties more durable and keeps adding new ones. The reshoring that was supposed to justify the cost is real in pledges and construction sites, but it barely shows up yet in jobs, capacity or the trade balance. Until it does, consumers are carrying the cost of a policy whose benefits have not arrived.