The average tariff rate on U.S. imports rose fivefold in 2025, and U.S. firms and consumers bore all the cost, according to new research published Feb. 12 by the Federal Reserve Bank of New York.
In an analysis of import data through November 2025, economists found that 90% of the economic burden of last year’s tariffs fell on U.S. importers rather than foreign exporters. The findings suggest that tariffs functioned as a tax on domestic businesses and consumers, with limited price concessions from overseas suppliers.
The research, published on the New York Fed’s Liberty Street Economics blog, was authored by Mary Amiti, Christopher Flanagan, Sebastian Heise and David E. Weinstein.
Using U.S. Census Bureau foreign trade statistics and U.S. International Trade Commission tariff schedules, the authors tracked monthly changes in statutory tariff rates and duties collected.
The weighted average statutory tariff rate stood at 2.6% at the start of 2025. It surged in April and May after tariffs on Chinese goods were raised by 125 percentage points, before being partially rolled back by 115 percentage points in mid-May. By December, the weighted average tariff rate had climbed to 13%.
The effective duty rate — calculated as duties collected divided by total import value — remained lower than the statutory rate because of exemptions and sourcing shifts. For example, although the United States maintains a 35% tariff on certain Canadian imports, 83% of those imports are exempt under the U.S.-Mexico-Canada Agreement.
The gap between statutory and effective rates widened sharply during the spring spike as importers shifted away from higher-tariff Chinese goods.
China’s Import Share Drops Below 10%
The data show significant reconfiguration of U.S. supply chains.
China accounted for 25% of U.S. non-oil imports in 2017. After tariff increases in 2018 and 2019, China’s share fell to about 15% by 2024. In the first 11 months of 2025, China’s share dropped another five percentage points, slipping below 10%.
Mexico and Vietnam gained the most market share during that period.
China now faces the highest tariffs among major U.S. trading partners included in the study, the authors said.
The central focus of the report is tariff incidence — how the cost of a tariff is divided between foreign exporters and domestic importers.
Although importers pay duties at the border, foreign suppliers could theoretically offset some of the cost by cutting export prices. If they do not, tariffs translate directly into higher import prices.
To measure this, the researchers examined 12-month changes in foreign export prices relative to changes in tariffs at the 10-digit Harmonized Tariff Schedule-country level from January 2023 through November 2025.
Their results show high pass-through of tariffs into U.S. import prices:
- From January through August 2025, 94% of the tariff incidence fell on U.S. importers, with foreign exporters absorbing 6%.
- In September and October, U.S. importers bore 92%.
- In November, U.S. importers bore 86%.
In practical terms, a 10% tariff in early 2025 corresponded to only a 0.6 percentage-point decline in foreign export prices. By November, a 10% tariff was associated with a 1.4% decline in export prices, indicating greater burden-sharing late in the year.
With the average tariff rate reaching 13% by December, the authors estimate that goods subject to the average tariff experienced import price increases of 11% relative to goods not subject to tariffs.
The findings are consistent with earlier research on the 2018–2019 tariffs, which also showed near-complete pass-through into U.S. import prices.
In response to public comments about exchange rate effects, the researchers noted that their regression framework controls for currency movements through country-time fixed effects. Supplemental analysis that explicitly incorporates exchange rates does not materially change the pass-through estimates, they said.
The authors emphasized that the views expressed are their own and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System.
Implications for Wholesale Distributors
For wholesale distributors — particularly in industrial, HVAC, electrical, plumbing and MRO sectors — the findings underscore that tariffs directly raise landed costs.
If 86% to 94% of tariff increases are passed through into import prices, distributors that rely on imported finished goods or components face higher acquisition costs unless they renegotiate pricing or shift sourcing.
The research suggests limited evidence that foreign exporters broadly reduced prices to offset tariffs, particularly during the first eight months of 2025. That leaves distributors weighing margin compression against price increases to customers.
Higher import prices also increase inventory carrying costs and working capital requirements, especially for distributors operating with large inventories and tight margins.
The decline in China’s share of U.S. imports signals ongoing supply chain diversification. However, shifting sourcing to countries such as Mexico and Vietnam can introduce higher logistics costs, new supplier qualification requirements, and operational complexity.
The report does not assess longer-term effects on domestic manufacturing or employment. It focuses narrowly on how tariff costs were distributed in the short run.
The bottom line, according to the data, is that the sharp rise in U.S. tariffs in 2025 translated primarily into higher import prices paid by American firms — including wholesale distributors — and their customers.
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