Donald Trump, ever since his first run for president, has been claiming that Americans are being “ripped off” by foreign countries and that tariffs are the solution to bring money back to America.
However, economists have long disputed that assertion, and now the Federal Reserve Bank of New York has a new report out backing that up.
“A new report from the Federal Reserve Bank of New York confirms what economists have long warned about: The burden of tariffs is borne almost entirely by the people living in the country that imposes them,” CNN reported this week. “That simple fact — now learned experientially in 21st century America — is an Econ 101 lesson as foundational as supply and demand. ’Twas ever thus!”
1/5
The New York Fed finds that “U.S. firms and consumers continue to bear the bulk of the economic burden of the high tariffs imposed in 2025.”https://t.co/X3Xz2tRn1j— Michael Pettis (@michaelxpettis) February 13, 2026
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“Over the course of 2025, the average tariff rate on U.S. imports increased from 2.6 to 13 percent. In this blog post, we ask how much of the tariffs were paid by the U.S., using import data through November 2025. We find that nearly 90 percent of the tariffs’ economic burden fell on U.S. firms and consumers,” the New York Fed’s blog post says.
“We highlight two main results. First, 94 percent of the tariff incidence was borne by the U.S. in the first eight months of 2025. This result means that a 10 percent tariff caused only a 0.6 percentage point decline in foreign export prices. Second, the tariff pass-through into import prices has declined in the latter part of the year,” the New York Fed says.
5/5
This is the part that academic economists have real trouble understanding. You don’t maximize consumption by minimizing the price of imports. You do so by maximizing the value of production and keeping wage growth in line with productivity growth.https://t.co/ARvtNna3b0— Michael Pettis (@michaelxpettis) February 13, 2026
“That is, a larger share of the tariff incidence was borne by foreign exporters by the end of the year. In November, a 10 percent tariff was associated with a 1.4 percent decline in foreign export prices, suggesting an 86 percent pass-through to U.S. import prices. Given that the average tariff in December was 13 percent (see the first chart), our results imply that U.S. import prices for goods subject to the average tariff increased by 11 percent (13 times 0.86) more than those for goods not subject to tariffs. These higher import prices caused firms to reorganize supply chains, as suggested by the findings presented in the two charts above.”
Photo courtesy of the Political Tribune media library.
