What Are Tariffs and Who Pays the Cost?
A tariff is a tax on imported goods, paid at the border by the American company that brings the product into the country. The foreign government does not pay it, and neither does the foreign manufacturer unless it cuts its own price. The U.S. importer writes the check to U.S. Customs and Border Protection, then usually raises prices to cover the cost.
A tariff is a tax on goods entering the country, paid by the domestic importer at the port of entry. Much of the cost then moves down the supply chain to the people who buy the product.
Key facts
- Importers paid $264 billion in customs duties in 2025, 3.3 times 2024’s $78.9 billion (Treasury).
- Foreign exporters absorbed about 6% of the 2025 tariffs, down from 20% in 2018-19. U.S. importers paid the rest (NBER).
- On February 20, 2026, the Supreme Court ruled 6-3 that the emergency-powers law behind most of the tariffs does not authorize them (opinion).
- Tariffs still in force cost about $1,100 per household a year, Yale estimates (Budget Lab).
- No law authorizes the $2,000 tariff dividend checks the president promised in November 2025 (PBS). Sen. Josh Hawley’s rebate bill, S. 2475, has no cosponsors and has not left committee (Congress.gov).
Tariffs are one of the oldest federal taxes. The First Congress’s first tax law was a tariff, and the Framers expected the government to depend “chiefly on” tariffs for revenue for “a long time,” as the Supreme Court’s 2026 opinion notes (opinion). By 2022 the average applied U.S. tariff was 1.5%, according to World Bank figures the Tax Foundation reports (Tax Foundation). In 2025 tariffs became a broad tax on nearly every trading partner at once.
How Tariffs Move from Port to Price Tag
A tariff does not stop at the border. It moves through every business that touches the product before it reaches you, and it can raise the price of goods that were never imported at all. A tariff on imported steel lets domestic mills raise their own prices toward the new import price, so a car or refrigerator made entirely in the United States costs more too.
- Foreign mill Steel producer abroad Ships coil at $800 a ton ↓ U.S. importer pays a 25% duty, $200 a ton, to Customs
- U.S. importer Steel distributor Adds the duty to its price ↓ Domestic mills price just under the new import price
- Domestic mill U.S. steelmakers Raise prices without a tariff of their own ↓ Manufacturers pay more for all steel, imported or not
- Manufacturer Carmaker, appliance maker, can maker Pays higher input costs ↓ Raises retail prices or cuts costs elsewhere
- Buyer You Pays more for cars, appliances, canned goods
Illustrative example using round numbers. Pass-through evidence: Gopinath and Neiman, NBER Working Paper 34620.
How a 25% steel tariff reaches a store shelf: Steel producer abroad (Ships coil at $800 a ton), U.S. importer pays a 25% duty, $200 a ton, to Customs, Steel distributor (Adds the duty to its price), Domestic mills price just under the new import price, U.S. steelmakers (Raise prices without a tariff of their own), Manufacturers pay more for all steel, imported or not, Carmaker, appliance maker, can maker (Pays higher input costs), Raises retail prices or cuts costs elsewhere, You (Pays more for cars, appliances, canned goods)
Two mechanisms push prices up beyond the duty itself.
The price umbrella. When imported steel costs more, domestic producers can raise their prices to just below the new import price and keep the difference, which is why protected industries often support tariffs.
Supply chain multiplication. A single tariff touches dozens of products downstream. A tariff on aluminum raises the cost of cans, car bodies, window frames, and electrical wiring, and each manufacturer prices off its higher costs.
American Importers and Shoppers Pay, Not Foreign Countries
The most important fact about tariffs is who writes the check. No foreign government sends money to the United States. The American importer pays U.S. Customs at the port, and the only way a foreign company shares the cost is by cutting its own price.
In 2025 foreign exporters barely did. Economists Gita Gopinath and Brent Neiman found that 94% of the 2025 tariffs showed up in the prices U.S. importers paid, compared with 80% in 2018-19 (NBER).
| Period | Value |
|---|---|
| 2018-19 tariffs | 20% |
| 2025 tariffs | 6% |
| Change | U.S. importers carried almost all of it |
Six studies of the 2018 and 2025 tariffs point the same way at the border. They differ on how much reached store shelves, and how fast.
What six studies found about who pays U.S. tariffs, and how each was done
Pass-through is the share of a tariff that shows up in the price a buyer pays. 100% means the buyer paid all of it; foreign sellers cut their prices by none of it.
What importers did next is the part economists still argue about. Some absorbed the cost in thinner margins, and some passed it to shoppers. Using prices through December 2025, the Yale Budget Lab estimates that 40% to 76% had reached consumer prices so far, and warns that more may follow as stockpiles run down (Yale Budget Lab).
Estimates of the cost per household depend on what is counted. Yale puts the tariffs now in force at about $1,100 a household a year, looking forward (Budget Lab). Looking back, the Democratic minority staff of Congress’s Joint Economic Committee estimated that consumers paid $231 billion from February 2025 to January 2026, about $1,745 per family, by multiplying Treasury's tariff revenue multiplied by the Congressional Budget Office's estimate of the share consumers pay (JEC Democrats).
Tariffs take the biggest share of income from the households with the least. Lower-income families spend more of what they earn on goods, so a tax on goods lands hardest on them. Yale’s estimate of the 2025 tariffs, made before the Supreme Court ruling, put the cost at 2.4% of income for the bottom tenth of households and 0.8% for the top tenth (Yale Budget Lab).
| Category | Value |
|---|---|
| Bottom 10% (about $38,840 income) | 2.4% |
| 2nd 10% | 1.5% |
| 3rd 10% | 1.4% |
| 4th 10% | 1.3% |
| 5th 10% (middle) | 1.3% |
| 6th 10% | 1.3% |
| 7th 10% | 1.2% |
| 8th 10% | 1.2% |
| 9th 10% | 1.1% |
| Top 10% (about $517,700 income) | 0.8% |
Values are the average yearly share of after-tax income lost to 2025 tariff increases, 2026-2034, with tariff policy as of November 17, 2025. Source: Yale Budget Lab, December 2025 data.
The gap widens once the 2025 tax and spending law is counted alongside the tariffs. In the same Yale data, the bottom tenth loses 5.6% of income from the two combined, while the top tenth gains 1.9%, because for high earners the law’s gains outweigh the tariff costs.
Tariffs and Grocery Prices in 2026
Grocery prices rose 1.8% in the year to September 2026, less than the 3.7% rise in all consumer prices. Some foods rose much faster: coffee 7.1% and beef 3.5%. Eggs fell 20.6% (Bureau of Labor Statistics).
| Category | Value |
|---|---|
| Coffee | 7.1% |
| Sugar and sweets | 5.5% |
| Beef and veal | 3.5% |
| All groceries (food at home) | 1.8% |
| Dairy | -0.7% |
| Eggs | -20.6% |
Change in the Consumer Price Index, September 2026 vs. a year earlier, not seasonally adjusted. Source: Bureau of Labor Statistics, CPI-U.
The price index does not say why a price moved. The Bureau of Labor Statistics measures prices, not causes, so these numbers cannot separate a tariff from a drought, a disease outbreak or a supplier raising margins. Studies that do isolate tariffs look at the prices of goods that were tariffed against similar goods that were not, like the ones in the table above.
Which Law Authorizes Which Tariff
Tariffs are a power the Constitution gives Congress, and presidents impose them only under laws Congress has passed. That distinction decided the 2026 ruling. The emergency-powers law the president relied on for most 2025 tariffs turned out not to cover them, but several older trade laws still do.
Tariffs in force in October 2026, by authorizing law.
How U.S. Tariff Rates Are Measured in 2026
The average U.S. statutory tariff rate was 11% in August 2026, and scheduled increases would lift it to 11.8% by year-end, the Yale Budget Lab estimates (Budget Lab). A different measure shows how far that is from recent history: in 2024, Customs collected duties worth 2.4% of the value of goods imported, the Tax Foundation reports.
Three different rates get quoted, and mixing them up makes the numbers look contradictory. The statutory or applied rate is what the law says, weighted by imports. The effective rate is what Customs actually collects, divided by imports. The rate importers actually pay falls below the statutory rate because of shipping lags, exemptions, more trade under the U.S.-Mexico-Canada Agreement, and uneven enforcement or evasion (NBER).
Tariff rates quoted since 2024, by what each one measures
Source: Tax Foundation; NBER Digest (Gopinath and Neiman); Yale Budget Lab
| Category | Value |
|---|---|
| 2022 (World Bank) | 1.5% |
| Just before the ruling (Feb. 2026) | 14.8% |
| Temporary Section 122 tariffs | 10.8% |
| 2026 current law, with scheduled increases | 11.8% |
Applied tariff rate: statutory rates weighted by the value of imports, before behavior changes. One measure from one source throughout. Source: Tax Foundation tariff tracker (the 2022 figure is the World Bank's, as the tracker reports it).
What the Supreme Court Ruled on Tariffs, and When
The Supreme Court has already ruled. It heard the case on November 5, 2025 and decided it on February 20, 2026, ruling 6-3 in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act does not authorize tariffs (opinion). Chief Justice John Roberts wrote for the Court. Justice Kavanaugh dissented, joined by Justices Thomas and Alito, and Justice Thomas also wrote his own dissent. The decision turned on the statute, not the Constitution, which is why other trade laws still support new tariffs.
- 6-3
- ruling, February 20, 2026
- $166B
- collected under IEEPA, Customs told the trade court
- $115.1 billion
- refunded May through August 2026
The fights now are in lower courts. The Court of International Trade set oral argument on the Section 301 forced-labor tariffs for September 30, 2026 (TaxProf Blog) and had published no ruling as of October 14 (Court of International Trade). The government’s appeal of the refund order is before the Federal Circuit (Husch Blackwell).
Who Gets Tariff Refunds and How the Process Works
Refunds go to the importer of record, the company that paid Customs, not to shoppers. The Supreme Court did not order refunds. The Court of International Trade did, directing the government to repay IEEPA tariffs to every importer of record. Customs pays claims through its Consolidated Administration and Processing of Entries (CAPE) system, filed in its ACE portal (CBP).
How an IEEPA tariff refund reaches an importer
- Before filing Set up an ACE portal account The importer of record or its customs broker needs an account in Customs’ ACE Secure Data Portal.
- Phase 1, spring 2026 File a CAPE declaration Covers unliquidated entries and entries within 80 days of liquidation, the largest group.
- Phase 2, from June 29, 2026 Reconciliation entries Entries flagged for reconciliation where the reconciliation entry is not yet on file.
- Contested Finally liquidated entries The government says it cannot refund these without a lawsuit. It estimates the exposure at more than $30 billion, and this is the part it appealed.
- After approval Treasury pays the importer Customs sends approved claims to the Treasury, which pays the importer of record.
Sources: U.S. Customs and Border Protection; Holland & Knight (June 2026); Husch Blackwell (June 2026).
The government filed notices of appeal on June 3, 2026, arguing the trade court cannot order refunds to importers that did not sue. The appeal does not stop refunds on the entries Customs is already processing (Holland & Knight; Husch Blackwell). The importers answered on October 5, 2026 (Husch Blackwell). On October 8, 2026, the trade court certified a class of all importers that paid IEEPA duties and have not sued on their own, so they will be bound by how that case ends (Freestyle World v. CBP).
The refunds were large enough to push the government’s customs receipts below zero. Collections more than tripled in 2025, then turned negative in the spring of 2026 as refunds went out, $115.1 billion of them from May through August.
| Category | Value |
|---|---|
| Q1 2025 | $22.8B |
| Q2 2025 | $64.4B |
| Q3 2025 | $86.8B |
| Q4 2025 | $90B |
| Q1 2026 (ruling Feb. 20) | $76.5B |
| Q2 2026 (refunds begin) | -$3.5B |
| July-August 2026 | $4.3B |
Values are net customs duties (gross receipts minus refunds) by calendar quarter, in billions of dollars, through 2026-08. Source: U.S. Treasury, Monthly Treasury Statement, Table 4.
Customs duties collected and refunded, by quarter (billions of dollars)
Source: U.S. Treasury, Monthly Treasury Statement, Table 4, Customs Duties
Every dollar of that refund goes to the company that paid Customs. No mechanism sends any of it to the shoppers who paid higher prices, and prices that rose during 2025 have not fallen back on their own.
After the ruling, the administration moved quickly to rebuild the tariffs on firmer legal ground. A temporary 10% tariff under Section 122 took effect on February 24 and expired on July 24. New Section 301 duties on imports from 60 economies replaced it (Federal Register), along with 50% Section 338 tariffs on a list of Canadian products (Tax Foundation). Since September 29, some of those Canadian products are barred from import altogether (Federal Register).
Where Each Tariff Fight Stands
Tariffs and refunds: status of each fight
As of October 14, 2026
- IEEPA tariffs Final ruling, struck down 6-3
The Supreme Court ruled on February 20, 2026 that IEEPA does not authorize tariffs. (source)
- IEEPA refunds to importers In litigation, refunds continue during the appeal
Customs keeps paying claims through its CAPE system. The government appealed the universal refund order to the Federal Circuit on June 3, 2026, and the importers filed their brief on October 5, 2026. On October 8, 2026 the trade court certified a class of importers that have not sued on their own. (source)
- Section 301 forced-labor tariffs In litigation, consolidated cases
Importers and 25 states sued in the Court of International Trade, which set oral argument for September 30, 2026. It had published no ruling as of October 14. (source)
- Section 338 tariff on Canada Agency action, listed products only
A 50% tariff on listed Canadian products, under three proclamations answering Canada’s treatment of U.S. alcohol, dairy and autos, took effect August 22, 2026. The list changed September 15, and since September 29 some of those products are barred from import. (source)
- Section 122 temporary tariff Ended
The 10% tariff ran from February 24 to July 24, 2026, the law’s 150-day limit. The trade court ruled it unlawful; the Federal Circuit stayed that ruling pending the government’s appeal, which blocks refunds for now. (source)
- $2,000 tariff dividend checks Proposal, not authorized
Sen. Josh Hawley’s rebate bill, S. 2475, has no cosponsors and has sat in the Senate Finance Committee since July 28, 2025. (source)
Source: Supreme Court; TaxProf Blog; Tax Foundation; PBS NewsHour
How Six Broad Tariff Rounds Ended, 1828 to 2026
Broad U.S. tariffs have a 200-year record. The 1828 tariff led to South Carolina’s nullification crisis, and the Smoot-Hawley Tariff of 1930 came as world trade was collapsing. Nixon’s 1971 import surcharge lasted less than five months, and Bush’s steel tariffs ended after about 20 months in 2003. The 2018 tariffs were followed by $23 billion in farm aid, and in 2026 the Supreme Court struck down most of the 2025 round.
- Tariff of Abominations South Carolina later nullified its successor
- Smoot-Hawley Tariff World trade fell about 66% from 1929 to 1934
- Nixon 10% import surcharge Ended within five months, after new currency deals
- Bush steel tariffs Ended in December 2003, about 20 months in
- First-term tariffs $23 billion in farm aid to offset retaliation
- Supreme Court strikes IEEPA tariffs 6-3 Refunds go to importers; new tariffs replace them
Sources: House Office of the Historian; State Department Office of the Historian; Proclamation 7741; GAO-22-468; Supreme Court of the United States.
200 years of broad tariffs and how each round ended: 1828: Tariff of Abominations (South Carolina later nullified its successor). 1930: Smoot-Hawley Tariff (World trade fell about 66% from 1929 to 1934). 1971: Nixon 10% import surcharge (Ended within five months, after new currency deals). 2002: Bush steel tariffs (Ended in December 2003, about 20 months in). 2018: First-term tariffs ($23 billion in farm aid to offset retaliation). 2026: Supreme Court strikes IEEPA tariffs 6-3 (Refunds go to importers; new tariffs replace them).
1828: The Tariff of 1828, better known as the Tariff of Abominations, sought to protect Northern and Western farm products from foreign competition. It raised the cost of living in the South. John C. Calhoun answered with the doctrine of nullification, and South Carolina’s legislature used it to nullify the Tariff of 1832 that replaced the 1828 law. South Carolina accepted a compromise tariff in the winter of 1833 (House Office of the Historian).
1930: The Smoot-Hawley Tariff raised duties on imports during an economic downturn. U.S. imports from Europe fell from $1.3 billion in 1929 to $390 million in 1932, and world trade fell about 66% between 1929 and 1934. Historians still debate how much the tariff itself deepened the Depression (State Department Office of the Historian).
1971: President Nixon imposed an extra 10% tariff on all dutiable imports to push trading partners to raise the value of their currencies and lower their trade barriers (State Department Office of the Historian). Major trading partners agreed to new exchange rates in December 1971, and the surcharge was in effect less than five months (Supreme Court opinion).
2002: President Bush imposed safeguard tariffs on a range of steel products in March 2002. He ended them in December 2003, finding their effectiveness “impaired by changed economic circumstances” (Proclamation 7741).
2018: The first Trump administration tariffed steel, aluminum, and $350 billion in Chinese goods. China retaliated against American farm exports, and the Agriculture Department paid farmers $23 billion in 2018 and 2019 to offset the losses (GAO).
2026: On February 20, the Supreme Court ruled 6-3 that the emergency-powers law does not authorize tariffs. Refunds began flowing to importers that spring, and the administration rebuilt much of the tariff wall under other trade laws.
Retaliatory Tariffs Hit Farm Exports First
Trading partners do not absorb tariffs quietly. They answer with their own tariffs on American exports, and they aim at products from politically important states.
China’s answer to the 2018 tariffs cut U.S. soybean sales by billions of dollars in a single year. American soybean exports to China fell from $12.2 billion in 2017 to $3.1 billion in 2018, a 75% drop, and China bought Brazilian soybeans instead (U.S. International Trade Commission). Sales to Mexico, Egypt, the EU and others rose by $4.7 billion that year, making up part of the loss.
The trade deficit barely moved. Tariffs are often justified as a way to close the trade deficit, the gap between what the U.S. imports and exports. In 2025 the overall deficit fell by $2.1 billion from 2024, and the goods deficit grew by $25.5 billion (Tax Foundation). Imports shifted to other suppliers instead. China’s share of U.S. goods imports fell from 22% at the end of 2017 to 8% by September 2025, while countries like India and Vietnam gained share (NBER).
When a Tariff Can Make Sense
Tariffs are a tool, and the question is whether a specific tariff achieves its stated goal at an acceptable cost. Some do.
- National security exceptions have a case. When a product vital to defense comes mostly from abroad, a tariff or subsidy that builds domestic capacity can address a real vulnerability. For computer chips, the CHIPS and Science Act took the subsidy route.
- Anti-dumping duties answer predatory pricing. When a foreign government subsidizes its producers to sell below cost and drive out competitors, a targeted duty can keep domestic capacity alive. World Trade Organization rules allow it.
- Infant industry protection has precedents. The U.S. protected early manufacturing in the 1800s, and South Korea and Japan used tariffs during industrialization. Those tariffs were temporary, targeted, and paired with investment.
- Broad tariffs fall mostly on U.S. buyers. The studies above found that foreign sellers cut their prices very little, in 2018 and in 2025.
- Free trade has costs too. Imports can close factories and hurt towns built around them. The policy question is how to help the people trade leaves behind, not whether they exist.
Common Questions About Tariffs
Who pays tariffs, the foreign country or Americans?
The American importer pays U.S. Customs at the port. In 2025 foreign exporters cut their prices by only about 6% of the tariff, so U.S. importers carried the rest and passed much of it on to buyers.
What did the Supreme Court rule about tariffs?
On February 20, 2026, the Court ruled 6-3 in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act does not authorize tariffs. The ruling did not touch tariffs imposed under other trade laws, and it did not itself order refunds. A lower court did, for importers.
When will the Supreme Court rule on tariffs?
It already has. The Court heard the case on November 5, 2025 and ruled on February 20, 2026. Cases over the tariffs that replaced them are in lower courts. The Court of International Trade set argument on the Section 301 forced-labor tariffs for September 30, 2026, and had published no ruling as of October 14. The government’s appeal of the refund order is before the Federal Circuit.
Will consumers get tariff refunds?
Not directly. Refunds go to the importer of record, the company that paid Customs, through Customs’ CAPE claims system. About $166 billion was collected under IEEPA. No law requires companies to pass refunds to customers, and no law authorizes tariff rebate checks: Sen. Josh Hawley’s rebate bill, S. 2475, has not left committee.
How high are U.S. tariffs now?
The average statutory rate was 11% in August 2026, and scheduled increases would lift it to 11.8% by year-end, according to the Yale Budget Lab. Because of exemptions, shipping lags and enforcement gaps, importers pay less than the statutory rate: in September 2025 they paid 14.1% against a 27.4% statutory rate.
Are tariffs raising grocery prices?
Grocery prices rose 1.8% in the year to September 2026, below the 3.7% rise in all prices, while coffee rose 7.1%. The Bureau of Labor Statistics does not separate tariff effects from weather, disease or other causes, so the price data alone cannot say how much tariffs added.
What You Can Do
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Ask your members of Congress to cosponsor the Trade Review Act. S. 1272 and H.R. 2665 would require the president to notify Congress within 48 hours of any new tariff and would end it after 60 days unless Congress passes a resolution approving it. The Senate bill has seven Republican and six Democratic cosponsors, and neither version has had a committee vote. Use the letter and call script below.
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If you run a business that paid IEEPA tariffs, file for the refund. Refunds go only to importers of record who file CAPE declarations through Customs, in phases with their own rules. Check them with Customs or your customs broker, and tell your members of Congress if a small importer is being left out.
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Watch for tariff costs in what you buy. Compare prices on the goods you buy often, and check the monthly Consumer Price Index for the categories that matter to your budget.
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Track the tariffs that replaced the ones the Court struck down. Section 232, 301, and 338 tariffs now carry most of the load. The Yale Budget Lab and Tax Foundation update their trackers as rates change.