Key Findings

The Tax Foundation, in a recent report, pointed out that the tariffs implemented by the Trump administration this year have pushed retail prices up by 4.9 percentage points. The report states that the current U.S. tariff levels are the highest since the 1930s, leading to a 6 percentage point increase in the cost of imported goods and a 4.3 percentage point increase in the cost of domestic goods. These figures are based on research released this month by a team of economists from Harvard University.

"President Trump and members of his administration have insisted that consumers are not bearing any of the burden of the tariffs, but the latest data shows the opposite," said Alex Durante, senior economist at the Tax Foundation, in the report.

Government Stance and Rebuttal

For months, the Trump administration has claimed that import tariffs would at most cause a one-time increase in inflation. White House Press Secretary Karoline Leavitt, at a press briefing on March 11, when asked about import taxes on most U.S. trading partners, said: "Tariffs are a tax cut for the American people."

Last month, Federal Reserve Board Governor Stephen Miran—who is on leave from his position as the White House's top economic adviser—said that import tariffs have not yet shown signs of pushing up price pressures. Speaking at the Economic Club of New York, Miran stated that many economists have "overestimated the risk of tariffs fueling inflation," and added that "relatively small changes in the prices of some goods have triggered what I consider to be an unreasonable level of concern."

Federal Reserve policymakers lowered borrowing costs last month to boost the job market, while emphasizing the need to monitor whether import tariffs will trigger price pressures beyond a temporary nature.

Warning from the Atlanta Fed

Economists at the Federal Reserve Bank of Atlanta said earlier this month that while Trump's tariffs have not triggered the price surge that was widely expected, they are likely to push inflation significantly higher and keep it elevated into next year. Citing business surveys, they noted that firms' cost and price expectations "suggest the tariff impact, while delayed, is significant."

"Since this time last year, firms' expectations for unit cost and price growth have risen markedly, with prices expected to remain elevated through 2026. Even non-importing firms not directly affected by the tariff rate increases expect price growth to accelerate, indicating that price pressures are broadening," the economists said.

Consumer Burden and Long-Term Impact

The Yale Budget Lab estimated this month that consumers face an effective tariff rate of 18%, which will push up prices by 1.3% in the short term and reduce average household income by $1,800. The institution also noted that, in the long run, prices for clothing, metals, and leather will be 10% to 14% higher than they would be without the import taxes.

The Tax Foundation stated that U.S. importers and their downstream businesses often initially absorb part of the tariff costs in the form of lower profits before passing the higher prices directly on to consumers. Consumers also indirectly bear the price increases caused by tariffs—domestic producers not subject to the tariffs tend to raise their prices to just below the new import prices, thereby outcompeting imported goods and securing higher profits at the expense of consumers.

The Tax Foundation gave an example: "With the current 50% tariffs on steel and aluminum, domestic steel and aluminum smelters also have an incentive to raise prices, while keeping them just below import prices to maintain competitiveness."

Legal Challenges

The Supreme Court will hear oral arguments early next month to determine whether the emergency powers Trump invoked under the International Emergency Economic Powers Act to impose tariffs this year are legal. If the Court rules that Trump overstepped his authority, most of his import taxes would be invalidated.