New York Fed: Americans bore nearly 90% of 2025 reciprocal-tariff bill

The Federal Reserve Bank of New York’s study of the reciprocal tariffs enacted in 2025 estimates that U.S. consumers and businesses absorbed approximately ninety percent of the economic cost over the first eleven months of the policy. That aggregate incidence masks sharp geographic and sectoral variation: separate analyses show nearly $199 billion of tariff exposure concentrated at the state level through November 2025, with particular pressure in competitive midterm battlegrounds and trade-dependent regions. While exporters and foreign suppliers took on a growing share of the burden later in the year, the New York Fed finds that short-run pass-through to domestic prices and margins dominated the policy’s initial impact. Midyear negotiations, exemptions and explicit caps on many European goods (including a roughly 15% ceiling in some accords) trimmed headline rates and reduced the ultimate effect for some product lines, but those political fixes and firms’ tactical responses did not fully shield households from higher costs. Firms responded by front-loading purchases, rerouting sourcing, building inventories, establishing foreign capacity, or temporarily absorbing duties — moves that muted immediate consumer price changes at the cost of thinner corporate margins and tighter working capital. Sectoral evidence points to acute disruptions in certain areas: agricultural shipments including soy through West Coast ports fell sharply in some months, logistics providers and specialized suppliers reported constrained hiring and investment, and smaller manufacturers faced higher collateral and liquidity strains. Trade statistics through November show episodic volatility as well — a sudden rise in the monthly goods deficit and a cumulative widening that underscore how duties can shift imbalances across partners rather than promptly correct them. The distributional pattern raises macroeconomic risks: concentrated domestic incidence increases the chance of upward pressure on consumer prices, squeezes business investment, and complicates monetary-policy trade-offs. Legally and financially, lingering uncertainties — from possible refunds to outstanding trade disputes — prolong firms’ adjustment costs and the potential for localized fiscal stress. Politically, the gap between public claims that exporters would pay and measured incidence borne at home undermines claims about tariff revenues and could add to trade frictions if retaliatory measures persist. For policymakers and corporate planners alike, the findings highlight the need to model pass-through dynamics, monitor state- and sector-level exposures, and anticipate short-term windows of heightened vulnerability when tariffs are imposed.