Trump Tariffs 2026: 90% Paid by Americans, Fed Study Reveals | Economic Impact

What Are Trump's 2026 Tariffs?

President Donald Trump's sweeping import tariffs implemented throughout 2025 have reached a critical turning point in early 2026, with a groundbreaking Federal Reserve study revealing that approximately 90% of these costs are being borne by American businesses and consumers rather than foreign exporters. The research from the New York Federal Reserve Bank shows that despite administration claims that foreign countries would foot the bill, the economic burden has overwhelmingly shifted to the U.S. domestic economy, creating significant inflationary pressures and political challenges ahead of the 2026 midterm elections.

Federal Reserve Study: The 90% Reality

The New York Fed's comprehensive analysis, published in February 2026, provides the most detailed examination yet of who actually pays for the Trump administration's trade policies. According to the research, in the first eight months of 2025, a staggering 94% of tariff costs fell directly on American importers, with this figure declining only slightly to 86% by November as foreign exporters began absorbing more costs. 'The data clearly shows that the burden has been overwhelmingly domestic,' said a senior Fed economist who spoke on condition of anonymity.

Key Findings from the Fed Report

• 90% average tariff cost borne by Americans throughout 2025
• Import duties reached highest levels in decades (average 13% vs. previous 2.6%)
• Generated $287 billion in federal revenue in 2025
• Contributed to 0.3% increase in core goods prices
• Added approximately $1,000 per household in annual costs

Inflation Impact and Economic Consequences

The tariff implementation has directly contributed to rising consumer prices in the United States. In December 2025, life in the U.S. was 2.7% more expensive compared to a year earlier, with January 2026 showing a slight decrease to 2.4% inflation. While not reaching crisis levels, this remains above the Federal Reserve's ideal 2% target. 'We see it clearly in the inflation figures, but it's somewhat deceptive,' explained Philip Marey, U.S. analyst at Rabobank. 'Goods are rising much more sharply in price than services. Without the tariffs, U.S. inflation would likely be around 2%.'

The global trade landscape has been dramatically reshaped by these policies. China experienced the most severe tariff increases, with effective rates surging from 10-11% to approximately 45%, while Mexico, Canada, and the European Union saw more modest increases to 5%, 3-4%, and 8-9% respectively. This differential approach has led to significant trade diversion, with Chinese imports of computers and electronics plummeting to just 35% of pre-tariff levels.

Political Pressure and Midterm Elections

With the 2026 midterm elections approaching, political pressure is mounting on the Trump administration to reconsider its tariff strategy. The White House is reportedly considering easing certain steel and aluminum tariffs, which currently stand at 50%, according to the Financial Times. 'There's now clearly an incentive to reduce certain tariffs,' Marey noted. 'He will mainly look at consumer products because his popularity is dropping hard.'

This political calculus has already led to tariff reductions on products like bananas and coffee from Brazil in late 2025. The administration faces growing bipartisan concern, with six House Republicans recently joining Democrats to vote against tariffs on Canada—a rare show of opposition to Trump's trade agenda.

Goldman Sachs Analysis: What's Next?

Goldman Sachs analysts expect the peak tariff impact to be felt in the first half of 2026, with most costs already passed through to consumers. The investment bank's research suggests that while the Federal Reserve will likely cut interest rates in December 2025, the outlook for 2026 remains uncertain due to tariff-related economic pressures. Their working assumption is that policymakers will slow the pace of easing in early 2026 as economic growth accelerates to 2-2.5% and inflation gradually cools.

Broader Economic Implications

The Yale Budget Lab's January 2026 report provides additional context on the long-term economic impacts. Current tariffs have raised the average effective rate to 16.9%—the highest since 1932—and are projected to cause a 1.3% short-term price increase, costing average households $1,751 annually. Real GDP growth is expected to slow by 0.4 percentage points in 2026, with unemployment rising 0.6-0.7 percentage points and 1.3 million fewer jobs created.

Long-term economic impacts include a persistent 0.3% smaller GDP ($100 billion annually) and significant sectoral shifts: manufacturing expands 3.2% while construction contracts 4.3%, agriculture declines 1.3%, and mining drops 2.1%. These structural changes reflect the complex economic consequences of protectionist policies that extend far beyond immediate price effects.

Frequently Asked Questions

How much are Americans paying for Trump's tariffs?

According to the Federal Reserve study, approximately 90% of tariff costs are borne by American businesses and consumers, amounting to about $1,000 per household in 2025 and projected to reach $1,300 in 2026.

What is the inflation impact of the tariffs?

The tariffs have contributed to keeping inflation above the Fed's 2% target, with December 2025 inflation at 2.7% and January 2026 at 2.4%. Without tariffs, economists estimate inflation would be closer to 2%.

Will Trump reduce tariffs before the midterm elections?

Political analysts expect some tariff reductions, particularly on consumer goods, as the administration faces declining popularity and pressure ahead of the 2026 midterm elections.

How have tariffs affected trade with China?

Chinese imports have been hit hardest, with effective tariff rates surging from 10-11% to approximately 45%, causing Chinese computer and electronics imports to plummet to 35% of pre-tariff levels.

What is the Supreme Court's role in the tariff debate?

The Supreme Court is expected to rule soon on the legality of Trump's tariff program, which could potentially overturn his entire economic agenda if found unconstitutional.

Sources

New York Post: Federal Reserve Tariff Study
CNN: Tariff Impact Analysis
Yale Budget Lab Report
Goldman Sachs Economic Outlook