Consumers and businesses paid nearly 90% of Trump tariffs in 2025, new analysis found

A New York Fed analysis finds that as the average U.S. tariff on imports rose to about 13% in 2025 (from under 3%), nearly 90% of the tariffs' economic burden fell on U.S. firms and consumers, with importers bearing 94% of costs from January–August and 86% by November. The Treasury collected $287 billion in tariffs in 2025 (up 192% year-over-year), but legal uncertainty over presidential emergency authority could force refunds of up to $168 billion if the tariffs are struck down by the Supreme Court. Despite administration claims the tariffs coincided with cooling inflation and strong GDP and jobs data, the analysis underscores distributional costs to U.S. businesses and consumers and poses fiscal and policy risks for markets and trade-sensitive sectors.

Analysis

Market structure: The New York Fed finding that 86–94% of a jump in average tariffs to ~13% was borne by U.S. importers implies immediate margin pressure for import-reliant retailers and manufacturers using imported inputs, while domestic producers with protected sectors (steel/aluminum) see pricing power. Tariff receipts ($287bn in 2025) act like a fiscal offset, modestly lowering net Treasury issuance but also operating like an input tax that can depress consumer real income if fully passed through.

Risk assessment: Key tail risks are (A) a Supreme Court ruling striking down tariffs and forcing up to $168bn refunds (large positive shock to importers) and (B) tariff escalation/institutionalization driving a durable 100–200bp effective input-cost shock for exposed sectors. Near-term catalysts: SCOTUS decision (weeks), Jan CPI release (days), Q1 earnings (weeks). Second-order risks include supplier contract clauses and reshoring CAPEX lags over 12–36 months.

Trade implications: Tactical opportunities include long domestic industrials constrained by import competition (NUE, STLD, X) and short large import retailers (WMT, TGT, AMZN) where 5–10% EPS downside risk exists if passthrough persists. Use 1–3 month option structures around the SCOTUS/CPI calendar — buy put spreads on retailers and call spreads on steel — and prefer pair trades to isolate tariff risk vs. demand.

Contrarian angles: Consensus assumes tariffs persist; the market underprices legal reversal risk. If SCOTUS limits authority, expect a violent rotation: retailers and importers could gap higher 10–25% while protected industrials correct. Historical precedent (2002 steel tariffs) shows short-lived protection with net costs to downstream firms; therefore capitalise on reversion within 30–90 days post-ruling.

Key Decisions for Investors

• Establish a 2.5% portfolio long position in Nucor (NUE) and 1.5% in Steel Dynamics (STLD) for 6–12 months to capture protected pricing; trim if steel futures fall >15% or if SCOTUS invalidates tariffs.
• Initiate a 2.5% net short exposure to Walmart (WMT) and Target (TGT) (equal-weighted) via 60–120 day put spreads (buy 5% OTM / sell 10% OTM) sized to limit max loss to 1% portfolio each; cover if CPI <2.5% month-on-month or SCOTUS rules tariffs invalid.
• Buy 3-month call spreads on NUE (buy 10% OTM / sell 20% OTM) totaling 1% notional as a leveraged play on tariff upside while simultaneously buying 3-month put spreads on AMZN (buy 5% OTM / sell 15% OTM) to hedge demand risk.
• Prepare a trigger-based rotation plan: if SCOTUS rules tariffs invalid or Treasury signals >$50bn in refundable claims within 30 days, redeploy proceeds to import-heavy winners (AMZN, WMT, TGT) and reduce steel/defense/industrial longs by 50% within 5 trading days.
• Adjust fixed income exposure: add 1–2% tactical duration (buy 2–5yr Treasuries) if SCOTUS strikes down tariffs and CPI prints <2.5%—expect 10–25bp downward pressure on yields; cut duration if CPI >3.5% or tariffs expanded.