Early data contradicts Trump’s claims on foreign burden
U.S. firms and consumers are absorbing most of the cost from new import tariffs, challenging former President Donald Trump’s assertions that foreign exporters would bear the brunt. Academic research, company surveys, and price tracking reveal that domestic businesses are largely paying the higher costs and gradually passing them on to consumers.
A Harvard-led study tracking over 350,000 goods found import prices rose by 4% since the tariffs began in March, while domestic product prices increased by 2%. Items like coffee, which the U.S. cannot produce domestically, saw some of the steepest hikes. Many foreign suppliers have raised dollar-denominated prices, adding further cost for American buyers.
Tariffs pressure inflation, complicating Fed policy
The Federal Reserve is now grappling with tariff-driven inflation at a time of economic uncertainty. Boston Fed estimates show tariffs could add 75 basis points to core inflation, while Chair Jerome Powell suggested they account for about 30 to 40 basis points of the current 2.9% reading. New Fed Governor Stephen Miran, however, downplayed the impact.
While the White House insists foreign firms will eventually absorb the tariffs, the Peterson Institute forecasts inflation will be 1 percentage point higher in the near term due to rising costs. Procter & Gamble, Swatch, and EssilorLuxottica have all raised prices, and consumer sites like Amazon and Shein reflect rising costs for Chinese goods.
Global trade slows as firms shift supply chains
Trump’s trade policy increased average U.S. import duties from 2% to 17%, but the long-term adjustment is still playing out. Reuters data shows 72% of firms across EMEA raised prices since the trade measures began, while only 18 issued profit warnings.
Global trade is already reacting. EU exports to the U.S. dropped 4.4% in July, and German shipments fell 20.1% in August. The WTO lowered its 2026 global trade growth forecast to 0.5%, citing delayed tariff impacts. ING predicts EU exports to the U.S. will drop 17% over the next two years, shaving 0.3% off the bloc’s GDP.
Uncertain outlook as costs ripple through economy
The transition is not over. Researchers expect further price hikes as businesses continue adjusting to the new regime, with some spreading increases over time. China’s production constraints and export controls on key goods like solar equipment may also add to U.S. inflation and supply instability.
As exporters, importers, and consumers continue negotiating who ultimately pays the cost, the pressure on household budgets and global trade networks is mounting. Whether Trump’s tariffs yield the intended reshoring benefits remains an open question as economic risks grow.
