New research reveals Trump’s trade war passed 96% of tariff costs to American consumers—not foreign countries

New research reveals Trump’s trade war passed 96% of tariff costs to American consumers—not foreign countries

President Donald Trump’s tariffs cost the average American household $1,000 last year, according to new research from the nonpartisan Tax Foundation. And that number is climbing—projected to reach $1,300 per household in 2026 if current policies remain in place.

Despite repeated claims that foreign countries would pay for these tariffs, independent research shows American families are footing the bill. The Kiel Institute for the World Economy found that U.S. consumers absorbed 96% of tariff costs, while foreign exporters paid just 4%.

“The claim that foreign countries pay these tariffs is a myth,” said Julian Hinz, research director at the Kiel Institute. “The data show the opposite: Americans are footing the bill.”

How Tariffs Became America’s Largest Tax Increase Since 1993

Using the International Emergency Economic Powers Act (IEEPA), the Trump administration imposed broad tariffs on China, Canada, Mexico, and the European Union. The Tax Foundation called these tariffs “the largest U.S. tax increase as a percent of GDP since 1993.”

The numbers tell a stark story. The weighted average tariff rate on imports surged from around 2% in 2024 to roughly 10% in 2025—the highest rate since 1946. According to the ABC News report, the federal government collected $264 billion in total tariff revenues in 2025, far short of the trillions regularly touted by the White House.

But here’s what matters for your wallet: That $264 billion didn’t come from foreign governments. It came from American importers, retailers, and ultimately, you.

Your Grocery Bill Tells the Real Story

Walk into any supermarket and you’ll see the tariff impact on your receipt. Bureau of Labor Statistics data shows:

• Coffee prices rose 33.6%
• Ground beef increased 19.3%
• Romaine lettuce jumped 16.8%
• Frozen orange juice climbed 12.4%

These aren’t isolated price spikes. They’re the direct result of tariffs on imported goods and the materials used to produce American products.

The Kiel Institute analyzed more than 25 million shipment records covering nearly $4 trillion in U.S. imports. Their research found that when Trump imposed a 50% tariff on Indian goods, export volumes to the U.S. dropped by 18-24%—but prices didn’t fall. Instead, Indian exporters maintained their profit margins and sold to other markets.

“Exporters responded to U.S. tariffs by shipping less, not by cutting prices,” the Kiel researchers wrote.

Why Foreign Companies Aren’t Paying These Tariffs

When Trump announced tariffs, the administration claimed foreign exporters would absorb the costs to maintain access to American markets. The data shows otherwise.

The Kiel Institute identified three key reasons foreign exporters don’t pay:

1. Alternative markets exist
Foreign companies can sell to Europe, Asia, and other regions. The U.S. is a large market, but it’s not the only market.

2. Tariffs are too large to absorb
With tariffs ranging from 10% to 50%, cutting prices to offset them would make exports unprofitable.

3. U.S. importers lack alternatives
Many American businesses can’t easily find new suppliers, giving existing exporters leverage to maintain prices.

The result? Tariff costs “percolate through to American consumers in numerous ways,” according to Fortune—through higher prices on imported goods, higher prices on domestic products made with imported parts, and reduced variety on store shelves.

The Economic Ripple Effect: Jobs and GDP Take a Hit

The Tax Foundation’s economic modeling reveals troubling long-term impacts:

• Long-run GDP could fall by 0.5% before accounting for foreign retaliation
• 447,000 full-time equivalent jobs lost from Section 232 and IEEPA tariffs combined
• Additional 141,000 jobs at risk from imposed retaliatory tariffs

Manufacturing employment—which Trump claimed tariffs would boost—has actually declined every month since April 2025, losing 60,000 jobs between “Liberation Day” and November.

Supreme Court Holds the Key

The legal status of these tariffs remains uncertain. In May, a panel of judges at the U.S. International Court of Trade unanimously ruled that the IEEPA tariffs were illegal. The U.S. Court of Appeals upheld this decision.

Now the Supreme Court must decide whether the president’s emergency powers under IEEPA include the authority to impose tariffs. Oral arguments in November suggested justices were skeptical of the administration’s claims, but a ruling has been delayed until at least late February 2026.

If the Supreme Court strikes down the IEEPA tariffs, the average effective tariff rate would fall to 4.6%—still the highest since 1973, but significantly lower than the current 9.9%.

What This Means for Your Household Budget

The $1,000 average increase means different things for different families. Lower-income households spend a larger share of their budget on necessities like food and basic goods—exactly the items hit hardest by tariffs.

“Lower-income filers are, on average, worse off under the combined effect of the tariffs and tax cuts in 2025,” wrote Erica York, vice president of federal tax policy at the Tax Foundation.

Even as some Americans see higher tax refunds from the One Big Beautiful Bill Act, those refunds of up to $1,000 are largely offset by the $1,000-$1,300 in tariff costs.

“The tariffs threaten to offset much of the economic benefits of the new tax cuts, while falling short of paying for them,” the Tax Foundation warned.

Looking Ahead: Will 2026 Bring Relief or More Pain?

Economists Peter Orszag and Adam Posen warn that inflation could surge above 4% by the end of 2026—nearly double the December 2025 rate of 2.7%.

Why? Because American importers absorbed initial tariff costs through 2025 by drawing down inventories and accepting lower margins. That cushion is running out.

“Historical evidence shows that tariff pass-through tends to be gradual, with consumer prices rising only as firms revise pricing with a lag,” Orszag and Posen wrote for the Los Angeles Times.

Meanwhile, Trump continues expanding tariff threats. In recent weeks, he’s threatened:

• 200% tariffs on French wine after President Emmanuel Macron declined to join his “Board of Peace”
• 25% tariffs on eight NATO members if Denmark doesn’t sell Greenland to the U.S.
• Additional tariffs on European countries for conducting military exercises in Greenland

The Bottom Line

Despite administration claims that tariffs would make America wealthy while forcing foreign countries to pay, independent research paints a different picture:

• American households paid an extra $1,000 in 2025, rising to $1,300 in 2026
• U.S. consumers bear 96% of tariff costs
• Grocery prices surged on everyday items like coffee and beef
• Manufacturing jobs declined instead of increasing
• The Supreme Court may invalidate many tariffs as illegal

“The tariffs are, in the most literal sense, an own goal,” the Kiel Institute researchers concluded. “Americans are footing the bill.”

As Trump’s second term continues, American families face a critical question: How much more will this trade war cost before it ends?

What do you think about the impact of tariffs on your household budget? Have you noticed price increases on everyday items? Share your experience in the comments below and let’s have a conversation about how trade policy affects real families.