Americans are paying for Trump’s tariffs
San José, CA – President Trump has long insisted that other countries are paying for U.S. tariffs on imports, despite the fact that it is the U.S. importer, not the foreign exporter, that pays the tariff bill. While the U.S. importer actually pays the U.S. government, foreign exporters could bear some or even most of the tax burden if they cut their prices.
The average U.S. tariff rate on imported goods has gone up from about 2.5% before Trump unleashed his trade war in April to about 18% today. This increase in tariffs of about 15% would require a drop in import prices of about 13% to fully offset them, meaning that the foreign exporters would be paying the entire cost of Trump’s tariffs.
But in fact, the average price of imports has started to rise, not fall. In July of 2025, U.S. import prices rose 0.4%, and over the past year have fallen 0.2%, far from the 13% drop needed for “the world” to pay for Trump’s tariffs. This means that the vast majority of the tariffs are being paid by U.S. businesses and consumers.
Tariff-related price increases have just started to show in the Consumer Price Index or CPI. The CPI has gone from a low of 2.4%, as compared to prices a year earlier in March, before Trump’s “Liberation Day” tariffs, to the latest 2.7% in July. So far it seems that the bulk of the cost of tariffs have been borne by U.S. businesses, but more and more of them are saying that they will be raising prices in the future.
This is not a small matter, as Trump is continuing to raise tariff rates, with the de minimis exception on all countries but China ending at the end of August (China’s de minimis tariff exception already ended).Trump is also threatening even more tariffs, as high as 200% on medical drugs, and 300% on semiconductors. Given that these tariff hikes from Trump never seem to end, the price increases will be even greater as time goes on.