U.S. companies and consumers are appearing to bear the brunt of the country’s new import tariffs, early indications show, contradicting assertions by Trump and complicating the Federal Reserve’s fight against inflation.
“Most of the cost seems to be borne by U.S. firms,” Harvard University professor Alberto Cavallo said in an interview to discuss his findings. “We have seen a gradual pass-through to consumer prices and there’s a clear upward pressure.”
A White House spokesperson said “Americans may face a transition period from tariffs” but the cost would “ultimately be borne by foreign exporters.” Companies were diversifying supply chains and bringing production to the United States, the spokesperson added.
Cavallo and researchers Paola Llamas and Franco Vasquez have been tracking the price of 359,148 goods, from carpets to coffee, at major online and brick-and-mortar retailers in the United States and they found that imported goods have become 4% more expensive since Trump started imposing tariffs in early March, while the price of domestic products rose by 2%.
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While foreign exporters absorb a small share, the majority of the burden has fallen on domestic firms, especially small and medium-sized businesses facing steep increases in import costs. These pressures are gradually being passed on to consumers, contributing to price increases across a wide range of goods.
Confirmed data shows that U.S. businesses and consumers are bearing the majority of costs resulting from Trump’s tariffs. According to an analysis by Goldman Sachs, 64% of the tariff burden has fallen on U.S. businesses with 22% passed to consumers, and just 14% absorbed by foreign exporters. This contradicts earlier claims by the Trump administration that foreign producers would be the primary payers. The tariffs, applied to a broad range of imported goods starting in early 2025, have raised the cost of doing business in the U.S., particularly for companies dependent on global supply chains.
Small and medium-sized businesses have been hit especially hard. A July survey by the Federal Reserve Bank of Boston found that average tariff rates paid by these firms rose from 6.5% in January to 11.4% by mid-year. Many of these businesses, under mounting financial strain, have begun passing the higher costs onto consumers—or plan to do so in the near future.
The extent of these price increases depends largely on how long firms expect the tariffs to remain in place. Those anticipating a longer-term tariff regime are more likely to adjust prices permanently, contributing to broader inflationary effects.
Retail price data supports this gradual pass-through. A Reuters report in October cited research from Harvard economist Alberto Cavallo showing that imported goods became approximately 4% more expensive, while domestically produced substitutes rose by around 2% since the tariffs began in March. Major retailers and manufacturers have also announced price increases in response to rising import costs.
Ultimately, the burden of Trump’s tariffs is clearly being felt domestically, with businesses absorbing the bulk of the impact so far, and consumers beginning to face higher prices at the checkout.
The long-term effects of these tariffs will depend on how businesses adapt and how long the trade measures remain in place. Some companies are already exploring alternative suppliers or reshoring production to reduce dependence on imports, but these transitions take time and often come with added costs. If tariffs persist, more firms may permanently adjust their pricing strategies, further embedding inflationary pressures into the economy. At the same time, the Federal Reserve faces added complexity in managing inflation, as tariff-driven price hikes operate separately from traditional demand-based inflation drivers.